#1
What does the price elasticity of demand measure?
The percentage change in price divided by the percentage change in quantity demanded
ExplanationSensitivity of quantity demanded to a change in price.
#2
Which of the following is an example of a perfectly elastic good?
Generic prescription drugs
ExplanationGoods where quantity demanded changes infinitely with any change in price.
#3
Which of the following factors does NOT affect the price elasticity of demand?
The level of advertising expenses
ExplanationFactors affecting how much quantity demanded changes with a change in price.
#4
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationSimple ratio to measure the responsiveness of quantity demanded to a change in price.
#5
Which of the following is an example of a product with inelastic demand?
Generic over-the-counter painkillers
ExplanationProducts with demand that changes relatively little with a change in price.
#6
If the price of a product increases by 20% and the quantity demanded decreases by 10%, what is the price elasticity of demand?
0.5
ExplanationPrice elasticity of demand formula: (Percentage change in quantity demanded) / (Percentage change in price).
#7
Which of the following is NOT a determinant of price elasticity of demand?
The price of the good
ExplanationFactors affecting how much quantity demanded changes with a change in price.
#8
What happens to total revenue when demand is inelastic and price increases?
Total revenue increases
ExplanationInelastic demand: price increase leads to a proportionately smaller decrease in quantity demanded, hence total revenue increases.
#9
What is the relationship between price elasticity of demand and total revenue?
They have an inverse relationship
ExplanationAs price elasticity of demand increases (becomes more elastic), total revenue decreases, and vice versa.
#10
If the price of a good decreases by 10% and the quantity demanded increases by 20%, what is the price elasticity of demand?
2
ExplanationPrice elasticity of demand formula: (Percentage change in quantity demanded) / (Percentage change in price).
#11
Which of the following factors affects the elasticity of supply?
The time horizon
ExplanationThe time frame considered for producers to adjust their production levels in response to price changes.
#12
If the price elasticity of demand for a good is 0.8, what does this suggest about the demand?
The demand is inelastic
ExplanationGoods where quantity demanded changes relatively less than proportionately to a change in price.
#13
What happens to total revenue when demand is elastic and price decreases?
Total revenue increases
ExplanationElastic demand: price decrease leads to a proportionately larger increase in quantity demanded, hence total revenue increases.
#14
If the price of a good increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?
0.5
ExplanationPrice elasticity of demand formula: (Percentage change in quantity demanded) / (Percentage change in price).
#15
Which of the following statements is true regarding perfectly elastic demand?
The quantity demanded is infinite at a particular price
ExplanationDemand where any price increase leads to zero quantity demanded.
#16
If the cross-price elasticity of demand between two goods is negative, what does it indicate about their relationship?
They are complementary goods
ExplanationGoods where an increase in the price of one leads to an increase in demand for the other.
#17
What is the income elasticity of demand for a normal good?
Greater than 1
ExplanationGoods where demand increases more than proportionately to a rise in income.
#18
If a 10% increase in the price of good X leads to a 15% decrease in the quantity demanded of good Y, what is the cross-price elasticity of demand between X and Y?
0.67
ExplanationCross-price elasticity formula: (Percentage change in quantity demanded of Y) / (Percentage change in price of X).
#19
What does a price elasticity of demand of -1.5 indicate?
The demand is relatively elastic
ExplanationSensitivity of quantity demanded to price changes, relatively responsive to changes.
#20
Which of the following goods is most likely to have a price elasticity of demand closest to zero?
Generic medications
ExplanationGoods where quantity demanded changes very little with a change in price.
#21
Which of the following goods is most likely to have a perfectly inelastic demand?
Cigarettes
ExplanationGoods where quantity demanded remains the same regardless of price changes.
#22
What does it mean if the price elasticity of demand for a good is greater than 1?
The demand is relatively elastic
ExplanationSensitivity of quantity demanded to price changes, relatively responsive to changes.
#23
Which of the following scenarios is most likely to have a high price elasticity of demand?
A large change in price for a luxury good
ExplanationGoods where quantity demanded changes significantly with even small changes in price.
#24
What does a price elasticity of demand of 0 indicate?
The demand is perfectly inelastic
ExplanationQuantity demanded remains constant regardless of price changes.
#25
Which of the following goods is most likely to have a perfectly elastic demand?
Gasoline from a single gas station
ExplanationDemand where consumers can immediately switch to alternatives with any price change.