Explanation

Own price elasticity shows percentage change in quantity demanded due to price change.

Formula: Elasticity = % change in quantity ÷ % change in price

Negative sign shows inverse relationship (law of demand).

Elasticity = -2.5 means demand is elastic (very responsive).

E_d = %ΔQ / %ΔP = -2.5  

If %ΔP = +10%  

Then %ΔQ = -2.5 × 10% = -25%.

Last verified on 24-04-2026

Explanation

• When demand and supply both increase (shift right) in a market.
• The quantity traded always increases.
• However, the price effect is uncertain.
• Price may increase, decrease, or remain stable depending on magnitude of shifts.

Last verified on 24-04-2026

Explanation

• This sentence compares prices between two cities.
• In negative comparisons, we use “not as + adjective + as”.
• It shows that Islamabad is more expensive than Lahore.
• “As cheap as” is the correct structure for comparison.

Last verified on 24-04-2026

Explanation

To find consumption spending, we can use the GDP formula:

• GDP = Consumption (C) + Investment (I) + Government Spending (G) + Net Exports (NX)

Given:

• GDP = $100 billion
• Government Spending (G) = $20 billion
• Investment (I) = $10 billion
• Net Exports (NX) = -$5 billion (negative because it's an import)

We rearrange the formula to solve for consumption:

• Consumption (C) = GDP - (Investment + Government Spending + Net Exports)
• Substituting the given values:
• Consumption (C) = $100 billion - ($10 billion + $20 billion - $5 billion)
• = $100 billion - $25 billion = $75 billion.

Last verified on 24-04-2026

Explanation

• The business cycle shows economic fluctuations over time.
• It has main phases like boom, slump, and recovery.
• These phases represent expansion and contraction of economic activity.
• “Acceleration” is not a standard phase of the business cycle.

Last verified on 24-04-2026

Explanation

• The Phillips Curve shows an inverse relationship between inflation and unemployment.
• When inflation increases, unemployment decreases, and vice versa.
• It is used in macroeconomics to study trade-offs in the economy.
• It helps policymakers understand economic stability choices.

Last verified on 24-04-2026

Explanation

• Pakistan’s economy is divided into Agriculture, Industry, and Services sectors.
• The Services sector contributes the largest share to GDP.
• It includes banking, trade, transport, education, and IT services.
• Over the years, it has become the dominant sector of the economy.

Last verified on 24-04-2026

Explanation

• The central bank’s main goal is to maintain price stability.
• It controls inflation and deflation in the economy.
• Monetary policy regulates money supply and interest rates.
• Stable prices ensure economic growth and stability.

Last verified on 24-04-2026

Explanation

• Monopoly is a market with only one seller.
• The firm produces a product with no close substitutes.
• It has full control over price (price maker).
• Entry of new firms is restricted or blocked.

Last verified on 24-04-2026

Explanation

• In perfect competition, a firm maximizes profit where MC = MR.
• This point occurs in the second stage of production.
• In this stage, Marginal Product (MP) is diminishing but positive.
• So, firms always operate where MP is decreasing.

Last verified on 24-04-2026