#1
What does price elasticity of demand measure?
The change in quantity demanded in response to a change in price
The change in price in response to a change in quantity demanded
The total expenditure on a good or service
The percentage change in income resulting from a price change
#2
Which of the following goods is likely to have the most elastic demand?
Salt
Insulin
Luxury cars
Pain medication
#3
What does cross-price elasticity of demand measure?
The change in quantity demanded of one good in response to a change in the price of another good
The change in quantity demanded of a good in response to a change in its own price
The change in income resulting from a price change
The responsiveness of quantity demanded to changes in income
#4
If the cross-price elasticity of demand between two goods is positive, what does this indicate?
The goods are substitutes
The goods are complements
The goods are unrelated
The goods are inferior
#5
What is the relationship between price elasticity of demand and total revenue?
As price elasticity of demand increases, total revenue decreases
As price elasticity of demand increases, total revenue increases
Price elasticity of demand and total revenue are unrelated
Price elasticity of demand has no effect on total revenue
#6
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
Percentage change in price / Percentage change in quantity demanded
Total revenue / Quantity demanded
Quantity demanded / Total revenue
#7
If the price elasticity of demand for a good is -2, what does this indicate?
Demand is inelastic
Demand is elastic
Demand is unitary elastic
Demand is perfectly elastic
#8
Which of the following is a characteristic of perfectly elastic demand?
The price elasticity of demand is greater than 1
The price elasticity of demand is less than 1
The price elasticity of demand is equal to 1
The price elasticity of demand is infinite
#9
What does it mean if the income elasticity of demand for a good is negative?
The good is inferior
The good is normal
The good is a luxury
The good has inelastic demand
#10
If the price elasticity of demand for a good is -0.5, what does this indicate?
Demand is inelastic
Demand is elastic
Demand is unitary elastic
Demand is perfectly inelastic
#11
Which of the following factors does NOT affect the price elasticity of demand for a good?
Availability of substitutes
Time horizon
Income level
Brand loyalty
#12
What is the formula for calculating income elasticity of demand?
Percentage change in quantity demanded / Percentage change in income
Percentage change in income / Percentage change in quantity demanded
Percentage change in quantity demanded / Percentage change in price
Percentage change in price / Percentage change in quantity demanded
#13
If the price elasticity of demand for a good is -1.5, what does this indicate?
Demand is perfectly inelastic
Demand is inelastic
Demand is unitary elastic
Demand is elastic
#14
If the price elasticity of demand for a good is -0.8, what does this indicate?
Demand is inelastic
Demand is elastic
Demand is unitary elastic
Demand is perfectly inelastic
#15
Which of the following factors tends to make demand more inelastic?
Longer time horizon
Availability of many substitutes
Necessity of the good
Low brand loyalty