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Elasticity of Demand Quiz

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2. If the price of a good increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?

Explanation

Price elasticity equals the percentage change in quantity demanded divided by the percentage change in price.

5. When demand is inelastic, how does a change in price affect total revenue?

Total revenue increases

Explanation

Price increase leads to revenue increase due to less sensitivity.

9. If the percentage change in quantity demanded is greater than the percentage change in price, the demand is:

Elastic

Explanation

Consumers are responsive to price changes.

14. If the income elasticity of demand for a good is negative, it indicates that the good is:

Inferior

Explanation

Goods whose demand decreases with increase in income.

15. What happens to total revenue when the price of a perfectly elastic good is increased?

Total revenue remains unchanged

Explanation

Quantity demanded falls to zero, so revenue stays constant.

20. If the percentage change in quantity demanded is equal to the percentage change in price, the demand is considered:

Unitary elastic

Explanation

Proportional change in quantity demanded to change in price.

1. What is the definition of price elasticity of demand?

The percentage change in quantity demanded divided by the percentage change in price.

Explanation

Measure of responsiveness of quantity demanded to a change in price.

4. If the cross-price elasticity of demand between two goods is positive, it implies that they are:

Substitute goods

Explanation

Goods that can be replaced with one another.

7. How is the midpoint formula for price elasticity of demand calculated?

((Q2 - Q1) / (Q1 + Q2)) / ((P2 - P1) / (P1 + P2))

Explanation

A method to calculate price elasticity that prevents distortion based on direction of change.

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8. Inelastic goods are generally associated with:

Necessities

Explanation

Essential items with limited substitutes.

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12. If the cross-price elasticity of demand between two goods is negative, they are considered:

Complementary goods

Explanation

Goods consumed together where the decrease in price of one increases demand for the other.

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13. Which of the following is a determinant of price elasticity of demand?

Consumer preferences

Explanation

Consumer inclinations influence responsiveness to price changes.

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3. Which of the following goods is likely to have a more elastic demand?

Luxury cars

Explanation

Goods with readily available substitutes.

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6. If the price elasticity of demand is perfectly inelastic, what is the numerical value of elasticity?

Infinity

Explanation

Quantity demanded does not change with any change in price.

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10. Which factor does NOT influence the elasticity of demand?

Production cost

Explanation

Costs related to manufacturing do not directly affect consumer responsiveness.

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11. The demand for which of the following goods is likely to be more elastic in the short run than in the long run?

Gasoline

Explanation

Consumers adjust behavior and find substitutes more easily in the long run.

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16. The concept of cross-price elasticity of demand is most relevant for which type of goods?

Substitute goods

Explanation

Goods closely related where price change in one affects demand for the other.

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18. Which factor is most likely to increase the elasticity of demand for a good?

Shorter time horizon

Explanation

Consumers have more time to find substitutes or adjust their behavior.

Elasticity of Demand Quiz

2. If the price of a good increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?

5. When demand is inelastic, how does a change in price affect total revenue?

9. If the percentage change in quantity demanded is greater than the percentage change in price, the demand is:

14. If the income elasticity of demand for a good is negative, it indicates that the good is:

15. What happens to total revenue when the price of a perfectly elastic good is increased?

20. If the percentage change in quantity demanded is equal to the percentage change in price, the demand is considered:

1. What is the definition of price elasticity of demand?

4. If the cross-price elasticity of demand between two goods is positive, it implies that they are:

7. How is the midpoint formula for price elasticity of demand calculated?

8. Inelastic goods are generally associated with:

12. If the cross-price elasticity of demand between two goods is negative, they are considered:

13. Which of the following is a determinant of price elasticity of demand?

3. Which of the following goods is likely to have a more elastic demand?

6. If the price elasticity of demand is perfectly inelastic, what is the numerical value of elasticity?

10. Which factor does NOT influence the elasticity of demand?

11. The demand for which of the following goods is likely to be more elastic in the short run than in the long run?

16. The concept of cross-price elasticity of demand is most relevant for which type of goods?

18. Which factor is most likely to increase the elasticity of demand for a good?

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