#1
What does price elasticity of demand measure?
The percentage change in quantity demanded divided by the percentage change in price.
ExplanationMeasures responsiveness of quantity demanded to price changes.
#2
What does a perfectly elastic demand curve look like?
Horizontal line
ExplanationDemand curve with infinite elasticity, quantity demanded is fixed at a specific price.
#3
Which of the following is true about cross-price elasticity of demand?
It measures the responsiveness of quantity demanded of one good to a change in the price of another good.
ExplanationQuantifies how demand for one good changes in response to a price change in another.
#4
What does it mean if the price elasticity of supply is greater than 1?
Supply is elastic
ExplanationPercentage change in quantity supplied is greater than percentage change in price.
#5
What happens to total revenue when demand is elastic and price increases?
Total revenue decreases.
ExplanationInverse relationship between total revenue and price when demand is elastic.
#6
Which of the following goods is likely to have the most inelastic demand?
Gasoline
ExplanationGoods with limited substitutes and essential use tend to have inelastic demand.
#7
What is the formula for calculating cross-price elasticity of demand?
(% Change in Quantity Demanded of Good X) / (% Change in Price of Good Y)
ExplanationMathematical expression for measuring the responsiveness of one good's demand to changes in another good's price.
#8
What is the formula for calculating price elasticity of demand?
(Change in price / Change in quantity demanded) * (Average price / Average quantity demanded)
ExplanationMathematical expression for measuring demand responsiveness to price changes.
#9
What is the primary determinant of the price elasticity of demand for a good?
Availability of substitutes
ExplanationExtent to which alternative products can replace the original affects demand elasticity.
#10
If the income elasticity of demand for a good is negative, what type of good is it?
Inferior good
ExplanationGoods for which demand decreases as consumer incomes rise.
#11
What does it mean if the price elasticity of supply is 0?
Supply is perfectly inelastic.
ExplanationNo change in quantity supplied despite changes in price.
#12
Which factor tends to make supply more elastic in the long run?
The ease of substituting factors of production.
ExplanationIncreased flexibility in substituting production inputs enhances supply elasticity.