Question

Match each term to the correct definition. Question 6 options: Diminishing marginal utility Law of demand Ceteris paribus condition Marginal utility Equilibrium price 1. The price where quantity supplied equals quantity demanded, and where there are no shortages or surpluses of the good or service. 2. Holding all else constant when analyzing the relationship between variables. 3. The additional enjoyment due to obtaining or consuming one more unit of a good or service. 4. When the additional satisfaction from consuming one more unit declines as more units are consumed. 5. When price falls, quantity demanded rises, ceteris paribus. Alternatively, when price rises, quantity demanded fall, ceteris paribus.

Answer 1

1. Equilibrium price :-

• The equilibrium price is the price where quantity supplied equals quantity demanded.
• The market is said to be in equilibrium when there are no shortages or surpluses of the goods or services which shows that the market is in a stable state.

2. Ceteris paribus condition :-

• Ceteris paribus condition holds all else constant when analyzing the relationship between variables.
• The term ceteris paribus means, all else held constant or all other thing's renain unchanged.

3. Marginal utility :-

• Marginal utility is the additional enjoyment or benefit gained by a consumer by consuming one more additional unit of a good or service.
• In other words it can be said that a marginal utility is the satisfaction a consume gains by consuming additional unit a good.

4. Diminishing marginal utility :-

• When the additional satisfaction from consuming one more unit declines as more units are consumed then it is called as diminishing marginal utility.
• The law of diminishing marginal utility states that, when the additional units of an output are consumed, the marginal utility rises until a point is reached where it starts to decline when more units are consumed.

5. Law of demand :-

• The law of demand states that when all else held constant, if price falls, the quantity demanded of a good rises.
• Similarly when the price rises, quantity demanded falls, ceteris paribus.