#1
Which of the following is an example of a necessity good?
Bottled water
ExplanationNecessity goods are essential for daily life.
#2
What does the price elasticity of demand measure?
The responsiveness of quantity demanded to changes in price
ExplanationIt quantifies how demand reacts to price changes.
#3
What is the formula to calculate price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationMeasure of responsiveness of quantity demanded to price changes.
#4
Which of the following factors does NOT affect the price elasticity of demand?
Brand loyalty
ExplanationBrand loyalty doesn't directly influence demand's price sensitivity.
#5
What does it mean if the price elasticity of demand is greater than 1?
Demand is elastic
ExplanationSmall price changes result in large quantity demanded changes.
#6
Which of the following is a characteristic of goods with elastic demand?
A small change in price leads to a large change in quantity demanded
ExplanationPrice change causes significant quantity demanded change.
#7
If the price elasticity of demand for a product is perfectly elastic, what does it mean?
Consumers are highly responsive to price changes
ExplanationConsumers will buy infinite quantities if price decreases.
#8
What happens to total revenue when the price of a product decreases and demand is elastic?
Total revenue increases
ExplanationPrice decrease leads to a proportionally larger increase in quantity sold.
#9
If the cross-price elasticity of demand between two goods is positive, what does it indicate?
The goods are substitutes
ExplanationIncrease in price of one leads to an increase in demand for the other.
#10
What is the relationship between price elasticity of demand and total revenue when demand is inelastic?
They move in the same direction
ExplanationPrice increase decreases quantity sold but revenue rises.
#11
What effect does a shift in the demand curve have on equilibrium price and quantity?
Both price and quantity increase
ExplanationIncrease in demand leads to higher equilibrium price and quantity.
#12
When is the price elasticity of supply perfectly inelastic?
When quantity supplied is fixed regardless of price changes
ExplanationSupply doesn't change with price variations.
#13
If the income elasticity of demand for a good is negative, what type of good is it?
Inferior good
ExplanationDemand decreases when consumer income rises.
#14
What is the primary determinant of the income elasticity of demand for a good?
Consumer income
ExplanationMeasures how demand changes with consumer income.
#15
Which of the following factors is likely to increase the price elasticity of demand for a good?
Shorter time horizon
ExplanationConsumers have more time to adjust their purchasing decisions.
#16
When is the price elasticity of supply perfectly elastic?
When quantity supplied is infinitely responsive to changes in price
ExplanationSupply quantity adjusts infinitely with slight price changes.
#17
Which of the following goods is most likely to have an income elasticity of demand greater than 1?
Luxury cars
ExplanationDemand for luxury cars increases more than proportionately to income rise.