#1
What does the price elasticity of demand measure?
The percentage change in quantity demanded divided by the percentage change in price
ExplanationMeasure of responsiveness of quantity demanded to changes in price
#2
What type of goods have a price elasticity of demand greater than 1?
Elastic goods
ExplanationGoods with demand highly responsive to price changes
#3
When the percentage change in quantity supplied is less than the percentage change in price, what type of supply exists?
Inelastic supply
ExplanationSupply with low responsiveness to price changes
#4
What does the income elasticity of demand measure?
The percentage change in quantity demanded divided by the percentage change in income
ExplanationMeasure of responsiveness of demand to changes in income
#5
In which scenario would the cross-price elasticity of demand be positive?
When two goods are substitutes
ExplanationGoods that can be substituted for each other show positive cross-price elasticity
#6
Which of the following factors does NOT affect the price elasticity of demand?
Government regulations
ExplanationExternal regulatory influences not impacting demand elasticity
#7
What does a perfectly elastic supply curve look like?
A horizontal line
ExplanationSupply infinitely responsive to price changes
#8
What is the formula for calculating cross-price elasticity of demand?
(Percentage change in price of Good A / Percentage change in quantity demanded of Good A) * (Percentage change in quantity demanded of Good B / Percentage change in price of Good B)
ExplanationMeasure of responsiveness of demand for Good A to price changes in Good B
#9
Which of the following statements about perfectly inelastic demand is true?
The demand curve is vertical
ExplanationDemand unaffected by price changes, represented by a vertical demand curve
#10
What happens to total revenue when demand is elastic and price increases?
Total revenue decreases
ExplanationFor elastic demand, decrease in quantity demanded outweighs price increase, leading to lower total revenue