#1
What does price elasticity of demand measure?
The change in quantity demanded in response to a change in price
ExplanationMeasures responsiveness of quantity demanded to price changes.
#2
Which of the following goods is likely to have the most elastic demand?
Luxury cars
ExplanationLuxury items typically have elastic demand due to substitutes.
#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
ExplanationMeasures how demand for one good changes with price changes of another.
#4
If the cross-price elasticity of demand between two goods is positive, what does this indicate?
The goods are substitutes
ExplanationPositive cross-price elasticity implies goods are substitutes.
#5
What is the relationship between price elasticity of demand and total revenue?
As price elasticity of demand increases, total revenue increases
ExplanationInversely related; more elastic demand yields higher revenue with price decrease.
#6
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationFormula for measuring responsiveness of quantity demanded to price.
#7
If the price elasticity of demand for a good is -2, what does this indicate?
Demand is elastic
ExplanationIndicates that quantity demanded changes more than proportionately to price.
#8
Which of the following is a characteristic of perfectly elastic demand?
The price elasticity of demand is infinite
ExplanationQuantity demanded changes infinitely with any change in price.
#9
What does it mean if the income elasticity of demand for a good is negative?
The good is inferior
ExplanationIndicates that as income increases, demand for the good decreases.
#10
If the price elasticity of demand for a good is -0.5, what does this indicate?
Demand is inelastic
ExplanationIndicates that quantity demanded changes less than proportionately to price.
#11
Which of the following factors does NOT affect the price elasticity of demand for a good?
Income level
ExplanationIncome level doesn't directly influence price elasticity of demand.
#12
What is the formula for calculating income elasticity of demand?
Percentage change in quantity demanded / Percentage change in income
ExplanationFormula for measuring responsiveness of quantity demanded to income changes.
#13
If the price elasticity of demand for a good is -1.5, what does this indicate?
Demand is elastic
ExplanationIndicates relatively large changes in quantity demanded to price changes.
#14
If the price elasticity of demand for a good is -0.8, what does this indicate?
Demand is inelastic
ExplanationIndicates quantity demanded changes less than proportionately to price.
#15
Which of the following factors tends to make demand more inelastic?
Necessity of the good
ExplanationGoods deemed necessities typically have more inelastic demand.