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Practice Question
II AS-I Concept
Very Short Answer Questions
1. Why did the demand for baskets decline?
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Answers
Answer:
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Explanation:
NTRODUCTION
In a general sense, economics is the study of production, distribution, and con-
sumption and can be divided into two broad areas of study: macroeconomics and
microeconomics. Macroeconomics deals with aggregate economic quantities, such
as national output and national income. Macroeconomics has its roots in microeco-
nomics, which deals with markets and decision making of individual economic units,
including consumers and businesses. Microeconomics is a logical starting point for
the study of economics.
This reading focuses on a fundamental subject in microeconomics: demand and
supply analysis. Demand and supply analysis is the study of how buyers and sellers
interact to determine transaction prices and quantities. As we will see, prices simul-
taneously reflect both the value to the buyer of the next (or marginal) unit and the
cost to the seller of that unit. In private enterprise market economies, which are the
chief concern of investment analysts, demand and supply analysis encompasses the
most basic set of microeconomic tools.
Traditionally, microeconomics classifies private economic units into two groups:
consumers (or households) and firms. These two groups give rise, respectively, to the
theory of the consumer and theory of the firm as two branches of study. The theory
of the consumer deals with consumption (the demand for goods and services) by
utility-maximizing individuals (i.e., individuals who make decisions that maximize
the satisfaction received from present and future consumption). The theory of the
firm deals with the supply of goods and services by profit-maximizing firms. The
theory of the consumer and the theory of the firm are important because they help
us understand the foundations of demand and supply. Subsequent readings will focus
on the theory of the consumer and the theory of the firm.
Invest