#1
Which of the following is a measure of price elasticity of demand?
Percentage change in quantity demanded divided by percentage change in price
ExplanationIt quantifies the responsiveness of quantity demanded to changes in price.
#2
What does a price elasticity of demand of -1.5 indicate?
Elastic demand
ExplanationA percentage change in price causes a greater percentage change in quantity demanded.
#3
Which of the following factors does NOT influence the price elasticity of supply?
Firm's marketing strategy
ExplanationSupply elasticity is determined by factors outside of marketing strategies.
#4
If the cross-price elasticity of demand between two goods is positive, it means that:
The goods are substitutes
ExplanationAn increase in the price of one good leads to an increase in demand for the other.
#5
What is the formula for calculating income elasticity of demand?
Percentage change in income divided by percentage change in quantity demanded
ExplanationIt measures the responsiveness of demand to changes in income.
#6
Which of the following factors does NOT affect the price elasticity of demand?
Income level
ExplanationPrice elasticity of demand is not influenced by consumer income levels.
#7
What does it mean if the price elasticity of demand for a good is perfectly inelastic?
Quantity demanded does not change with any change in price
ExplanationConsumers are completely unresponsive to changes in price.
#8
What is the formula for calculating price elasticity of supply?
Percentage change in quantity supplied divided by percentage change in price
ExplanationIt measures the responsiveness of quantity supplied to changes in price.
#9
Which of the following is a characteristic of perfectly elastic demand?
Flat demand curve
ExplanationAny change in price leads to an infinitely large change in quantity demanded.
#10
When the price elasticity of supply is greater than 1, the supply curve is considered to be:
Elastic
ExplanationQuantity supplied is highly responsive to changes in price.
#11
If a 10% increase in price leads to a 5% decrease in quantity demanded, what is the price elasticity of demand?
0.5
ExplanationA less than proportionate change in quantity demanded in response to a change in price.
#12
Which of the following goods is likely to have the most elastic demand?
Luxury cars
ExplanationDemand is highly responsive to changes in price for luxury items.
#13
What does a negative cross-price elasticity of demand between two goods indicate?
The goods are complements
ExplanationAs the price of one good increases, demand for the other good decreases.
#14
What happens to total revenue when the price elasticity of demand is greater than 1?
Total revenue decreases
ExplanationAs price increases, quantity demanded decreases proportionately more, leading to lower revenue.
#15
If the price elasticity of demand for a good is -0.75, how would you describe its demand?
Inelastic
ExplanationA change in price leads to a proportionately smaller change in quantity demanded.