#1
Which of the following is true about price elasticity of demand?
It measures the responsiveness of quantity demanded to a change in price.
It measures the responsiveness of price to a change in quantity demanded.
It measures the total revenue change when price changes.
It measures the responsiveness of quantity supplied to a change in price.
#2
What does a price elasticity of demand of 0.5 indicate?
Demand is elastic.
Demand is inelastic.
Demand is perfectly elastic.
Demand is perfectly inelastic.
#3
Which of the following is a measure of price elasticity of demand?
Percentage change in quantity demanded divided by percentage change in price
Percentage change in price divided by percentage change in quantity demanded
Percentage change in quantity supplied divided by percentage change in price
Percentage change in price divided by percentage change in quantity supplied
#4
If the price elasticity of demand for a good is greater than 1, it means that the demand is:
Perfectly inelastic
Elastic
Unitary elastic
Inelastic
#5
If the cross-price elasticity between two goods is negative, what does it indicate?
The goods are substitutes.
The goods are complements.
The goods are inferior.
There is no relation between the goods.
#6
What is the formula for calculating price elasticity of demand using the midpoint method?
((Q2 - Q1) / (Q2 + Q1)) / ((P2 - P1) / (P2 + P1))
((Q2 - Q1) / (Q1 + Q2)) / ((P2 - P1) / (P1 + P2))
((Q2 - Q1) / (Q1 * Q2)) / ((P2 - P1) / (P1 * P2))
((Q2 - Q1) * (P1 + P2)) / ((P2 - P1) * (Q1 + Q2))
#7
If a 10% increase in the price of a good leads to a 5% decrease in quantity demanded, what is the price elasticity of demand?
#8
Cross-price elasticity measures the responsiveness of the quantity demanded of one good to a change in the price of another good. If the cross-price elasticity is negative, it indicates that the goods are:
Substitutes
Complements
Normal goods
Inferior goods
#9
The total revenue test is used to determine the price elasticity of demand. If a price increase leads to an increase in total revenue, demand is:
Elastic
Inelastic
Unitary elastic
Perfectly inelastic
#10
Which of the following is NOT a determinant of price elasticity of demand?
Availability of substitutes
Time period
Luxury or necessity
Price of the good itself
#11
Under what circumstances would a good have a perfectly elastic demand?
When there are no substitutes available for the good.
When consumers are not sensitive to changes in price.
When consumers are willing to buy any quantity at a given price.
When the price changes by any amount result in zero change in quantity demanded.
#12
Which of the following goods is most likely to have an elastic demand?
Salt
Insulin for diabetic patients
Diamonds
Milk
#13
The midpoint formula for calculating price elasticity of demand is used because it:
Is easier to calculate
Provides a more accurate measure regardless of the direction of change
Is less affected by changes in quantity and price
Is preferred by economists
#14
If a good has perfectly elastic demand, what can be said about the price elasticity of demand?
It is equal to zero
It is infinite
It is greater than one
It is less than one
#15
When calculating the price elasticity of demand using the midpoint formula, the formula is expressed as:
((Q2 - Q1) / (Q1 + Q2)) / ((P2 - P1) / (P1 + P2))
((Q2 - Q1) / (Q1 + Q2)) * ((P2 - P1) / (P1 + P2))
((Q2 + Q1) / (Q1 - Q2)) / ((P2 + P1) / (P1 - P2))
((Q2 - Q1) * (P1 + P2)) / ((Q1 + Q2) * (P2 - P1))
#16
If the price elasticity of demand for a good is -0.5, it means that the demand is:
Elastic
Inelastic
Unitary elastic
Perfectly inelastic