#1
What does price elasticity of demand measure?
The change in quantity demanded in response to a change in price
ExplanationMeasures responsiveness of quantity demanded to price changes.
#2
If the price elasticity of demand for a good is greater than 1, it is considered:
Elastic
ExplanationDemand is responsive to price changes.
#3
What does the price elasticity of demand tell us about the responsiveness of quantity demanded to a change in price?
It measures the percentage change in quantity demanded relative to the percentage change in price.
ExplanationQuantifies how demand changes relative to price changes.
#4
If the price elasticity of demand for a good is greater than 1, what does this suggest about demand?
Demand is elastic.
ExplanationDemand is highly responsive to price changes.
#5
What is the formula for price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationFormula to quantify responsiveness of demand to price changes.
#6
What does a price elasticity of demand of 0 imply?
Perfectly inelastic demand
ExplanationQuantity demanded doesn't change with price.
#7
What does the cross-price elasticity of demand measure?
The change in quantity demanded of one good in response to a change in the price of another good
ExplanationMeasure of how demand for one good changes with the price of another.
#8
If the price of a good increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?
2
ExplanationPrice elasticity calculated as percentage change in quantity demanded over percentage change in price.
#9
Which of the following goods is likely to have the most inelastic demand?
Salt
ExplanationDemand for essential goods with few substitutes.
#10
What is the main determinant of the price elasticity of demand for a good?
The availability of substitutes
ExplanationExtent to which similar products are available.
#11
If the price of gasoline increases by 20% and the quantity demanded decreases by 10%, what is the price elasticity of demand?
2
ExplanationCalculated as percentage change in quantity demanded over percentage change in price.
#12
What is the income elasticity of demand for a normal good?
Positive
ExplanationDemand increases with income.
#13
Which of the following is an example of a product with elastic demand?
Designer handbags
ExplanationLuxury goods with many substitutes.
#14
What happens to total revenue when demand is elastic and price decreases?
Total revenue increases
ExplanationAs price falls, quantity sold increases, leading to higher revenue.
#15
What does the coefficient of price elasticity of supply measure?
The change in quantity supplied in response to a change in price
ExplanationMeasure of how quantity supplied changes with price.
#16
If the price elasticity of supply for a good is less than 1, it is considered:
Inelastic
ExplanationSupply is less responsive to price changes.
#17
What is the formula for price elasticity of supply?
Percentage change in quantity supplied / Percentage change in price
ExplanationFormula to quantify responsiveness of supply to price changes.
#18
What does a price elasticity of supply of 0 imply?
Perfectly inelastic supply
ExplanationQuantity supplied doesn't change with price.
#19
Which factor typically determines the elasticity of demand for a product?
Time horizon
ExplanationDuration over which demand response to price changes is observed.
#20
Which factor typically determines the elasticity of supply for a product?
Time horizon
ExplanationExtent of time available for suppliers to respond to price changes.
#21
Which of the following represents perfectly elastic demand?
Ed = -∞
ExplanationDemand quantity changes infinitely with any change in price.
#22
What does a price elasticity of supply greater than 1 indicate?
Elastic supply
ExplanationSupply is responsive to price changes.