#1
What does elasticity measure in economics?
The responsiveness of quantity demanded to changes in price
ExplanationMeasure of quantity demanded responsiveness to price changes.
#2
Which of the following goods is likely to have the most elastic demand?
Luxury cars
ExplanationGoods whose demand is highly sensitive to price changes.
#3
What happens to the tax burden when demand is perfectly inelastic?
Consumers bear all of the tax burden
ExplanationConsumers bear entire tax burden when demand is unresponsive to price changes.
#4
If a tax is imposed on a good and the supply is perfectly elastic, who bears the burden of the tax?
Consumers
ExplanationEntire tax burden is shifted to consumers when supply is highly responsive to price changes.
#5
What is the relationship between the price elasticity of demand and total revenue?
They move in opposite directions
ExplanationAs elasticity increases, total revenue decreases and vice versa.
#6
If the cross-price elasticity of demand between two goods is positive, what does it indicate?
The goods are substitutes
ExplanationPositive cross-price elasticity implies goods are substitutes.
#7
What does it mean if the income elasticity of demand for a good is greater than 1?
The good is a luxury good
ExplanationGoods with income elasticity greater than 1 are considered luxury goods.
#8
Which of the following is an example of a good with perfectly elastic demand?
Land
ExplanationGoods with perfectly elastic demand have infinite responsiveness to price changes.
#9
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationRatio of percentage change in quantity demanded to percentage change in price.
#10
What is the formula for calculating income elasticity of demand?
Percentage change in quantity demanded / Percentage change in income
ExplanationRatio of percentage change in quantity demanded to percentage change in income.
#11
In the long run, how does the elasticity of supply tend to change?
It becomes more elastic
ExplanationSupply tends to become more responsive to price changes in the long run.
#12
What is the tax incidence of a tax on a perfectly inelastic demand curve?
Entirely on producers
ExplanationProducers bear entire tax burden when demand is perfectly inelastic.
#13
What is the formula for calculating cross-price elasticity of demand?
Percentage change in quantity demanded of good A / Percentage change in price of good B
ExplanationRatio of percentage change in quantity demanded of one good to percentage change in price of another.
#14
If a tax is levied on a good and the demand is perfectly elastic, who bears the burden of the tax?
Producers
ExplanationProducers bear entire tax burden when demand is infinitely responsive to price changes.