#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 represents perfectly elastic demand?
Elasticity coefficient equal to infinity
ExplanationDemand changes infinitely for a slight price change
#3
What does a price elasticity of 0.5 indicate?
The demand is inelastic
ExplanationDemand is not very responsive to price changes
#4
What happens to total revenue when demand is elastic and the price is decreased?
Total revenue increases
ExplanationPrice decrease leads to a proportionally larger increase in quantity sold
#5
How is price elasticity of demand calculated?
Percentage change in quantity demanded divided by percentage change in price
ExplanationRatio of percentage change in quantity to percentage change in price
#6
If the price of a product increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?
0.5
ExplanationPrice elasticity calculated as the ratio of percentage changes
#7
What is the main assumption made when calculating price elasticity of demand using the midpoint method?
Price changes are small
ExplanationAssumes linear demand curve and small price changes
#8
Which of the following goods is likely to have the most elastic demand?
Luxury cars
ExplanationConsumers are more sensitive to price changes for luxury items
#9
In which scenario is demand likely to be perfectly inelastic?
Necessities like food
ExplanationDemand does not change regardless of price fluctuations
#10
What happens to total revenue when demand is inelastic and the price is increased?
Total revenue increases
ExplanationPrice increase leads to a proportionally smaller decrease in quantity sold
#11
Which of the following factors does NOT affect the price elasticity of demand?
Income level of consumers
ExplanationIncome level does not directly affect responsiveness to price changes
#12
What is the price elasticity of demand for a perfectly inelastic demand curve?
0
ExplanationQuantity demanded does not change with price changes