#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
Which of the following statements is true regarding perfectly inelastic demand?
The demand curve is vertical.
ExplanationQuantity demanded remains constant, regardless of price changes.
#9
Which of the following is an example of a perfectly elastic supply curve?
Labor
ExplanationSupply curve with infinite elasticity, quantity supplied can increase without a change in price.
#10
What is the relationship between the price elasticity of demand and total revenue when demand is inelastic?
As price increases, total revenue increases.
ExplanationDirect relationship between price and total revenue when demand is inelastic.
#11
What is the formula for calculating income elasticity of demand?
(% Change in Quantity Demanded) / (% Change in Income)
ExplanationMathematical expression for measuring the responsiveness of demand to changes in income.
#12
Which of the following goods is likely to have the most elastic demand?
Brand-name clothing
ExplanationGoods with many substitutes and discretionary use tend to have elastic demand.
#13
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.
#14
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.
#15
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.
#16
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.
#17
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.
#18
If the price elasticity of demand for a good is -0.5, what type of good is it?
Luxury good
ExplanationGoods for which demand decreases proportionally less than the price increase.
#19
What is the main determinant of the price elasticity of supply for a good?
Availability of inputs
ExplanationAccessibility and abundance of production inputs impact supply elasticity.
#20
If the price elasticity of demand for a good is -2, how will a 10% increase in price affect the quantity demanded?
Quantity demanded will decrease by 20%.
ExplanationPercentage decrease in quantity demanded is twice the percentage increase in price.
#21
What is the main determinant of the cross-price elasticity of demand for two goods?
Availability of substitutes for the first good
ExplanationExtent to which the first good can be replaced by alternatives influences cross-price elasticity.
#22
What does it mean if the price elasticity of supply is less than 1?
Supply is inelastic.
ExplanationPercentage change in quantity supplied is less than percentage change in price.
#23
What is the main determinant of the price elasticity of demand for a good?
The availability of close substitutes
ExplanationCloseness of alternatives affects the elasticity of demand for a particular good.
#24
If the cross-price elasticity of demand for two goods is positive, what type of goods are they?
Substitute goods
ExplanationGoods for which an increase in the price of one leads to an increase in demand for the other.
#25
What does it mean if the price elasticity of supply is equal to 1?
Supply is unit elastic.
ExplanationPercentage change in quantity supplied is equal to percentage change in price.