Elasticity and its Implications in Economics Quiz

Test your knowledge on elasticity in economics with questions on demand, supply, formulas, and implications for producers and taxation.

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2. Which of the following goods is likely to have an elastic demand?

Salt

Gasoline

Luxury cars

Bread

4. Inelastic demand is characterized by a price elasticity coefficient of:

Equal to 1

Greater than 1

Less than 1

Equal to 0

1. What is price elasticity of demand?

The percentage change in quantity demanded divided by the percentage change in price

The absolute change in quantity demanded divided by the absolute change in price

The percentage change in price divided by the percentage change in quantity demanded

The absolute change in price divided by the absolute change in quantity demanded

3. If the cross-price elasticity of two goods is positive, what does it indicate about their relationship?

They are substitutes

They are complements

They have no relationship

They are normal goods

6. What does a price elasticity of -0.5 indicate about the demand?

Elastic demand

Inelastic demand

Unitary elastic demand

Perfectly elastic demand

8. If the price of a good increases by 10%, and the quantity demanded decreases by 5%, what is the price elasticity of demand?

0.5

-0.5

-1

10. If the price elasticity of supply is greater than 1, how would you describe the supply?

Perfectly elastic

Inelastic

Unitary elastic

Elastic

5. What is the formula for calculating income elasticity of demand?

Percentage change in quantity demanded divided by percentage change in income

Percentage change in income divided by percentage change in quantity demanded

Absolute change in quantity demanded divided by absolute change in income

Absolute change in income divided by absolute change in quantity demanded

7. Which factor is NOT a determinant of price elasticity of demand?

Availability of substitutes

Necessity or luxury

Advertising

Time horizon

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9. What is the relationship between elasticity and total revenue when demand is elastic?

As price increases, total revenue increases

As price increases, total revenue decreases

As price decreases, total revenue increases

As price decreases, total revenue decreases

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11. How is cross-price elasticity of demand calculated?

Percentage change in quantity demanded of one good divided by percentage change in income

Percentage change in quantity demanded of one good divided by percentage change in price of another good

Percentage change in price of one good divided by percentage change in quantity demanded of another good

Percentage change in income divided by percentage change in price of another good

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12. Which of the following is a characteristic of a perfectly inelastic demand?

Elasticity coefficient is greater than 1

Elasticity coefficient is less than 1

Elasticity coefficient is equal to 0

Elasticity coefficient is equal to 1