#1
What does elasticity measure in consumer behavior?
The change in quantity demanded in response to a change in price
ExplanationElasticity measures how quantity demanded changes when price changes.
#2
Which of the following scenarios indicates an elastic demand?
A small change in price leads to a large change in quantity demanded
ExplanationElastic demand means a small change in price causes a large change in quantity demanded.
#3
What does a price elasticity of 0.5 indicate?
Inelastic demand
ExplanationA price elasticity of 0.5 indicates inelastic demand.
#4
If the cross-price elasticity between two goods is negative, what does it indicate?
The goods are complements
ExplanationNegative cross-price elasticity indicates complementary goods.
#5
Which factor does NOT affect the price elasticity of demand?
Income level of consumers
ExplanationIncome level of consumers does not affect the price elasticity of demand.
#6
What is the likely elasticity of demand for luxury goods?
Elastic
ExplanationLuxury goods typically have elastic demand.
#7
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationPrice elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price.
#8
What is the coefficient of elasticity of demand when demand is perfectly inelastic?
0
ExplanationWhen demand is perfectly inelastic, the coefficient of elasticity of demand is 0.
#9
If the price elasticity of demand for a good is 2.5, what does it mean?
Demand is elastic
ExplanationA price elasticity of demand of 2.5 means demand is elastic.
#10
What does a negative income elasticity of demand indicate?
Inferior good
ExplanationA negative income elasticity of demand indicates an inferior good.
#11
Which of the following statements is true about perfectly elastic demand?
The demand curve is horizontal
ExplanationIn perfectly elastic demand, the demand curve is horizontal.