#1
Which of the following best describes price elasticity of demand?
A measure of how much quantity demanded responds to a change in price.
A measure of how much quantity supplied responds to a change in price.
A measure of how much consumer income changes in response to a change in price.
A measure of how much consumer preferences change in response to a change in price.
#2
If a product has an elastic demand, what does it mean?
Consumers are not very responsive to changes in price.
Consumers are highly responsive to changes in price.
The quantity demanded does not change with price changes.
The quantity supplied matches the quantity demanded perfectly.
#3
What is the formula to calculate 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.
Change in quantity demanded multiplied by change in price.
Change in price divided by change in quantity demanded.
#4
If a good has a price elasticity of demand of -2, what does it indicate?
Demand is elastic.
Demand is inelastic.
Demand is unit elastic.
Demand is perfectly elastic.
#5
Which of the following factors affects the price elasticity of demand?
Availability of substitutes.
Income level of consumers.
Time horizon considered.
All of the above.
#6
What does it mean if the price elasticity of demand is greater than 1?
Demand is inelastic.
Demand is elastic.
Demand is perfectly inelastic.
Demand is perfectly elastic.
#7
What is the formula for calculating income elasticity of demand?
Percentage change in quantity demanded divided by percentage change in income.
Percentage change in income divided by percentage change in quantity demanded.
Change in quantity demanded multiplied by change in income.
Change in income divided by change in quantity demanded.
#8
What happens to total revenue when the price of an inelastic good increases?
Total revenue increases.
Total revenue decreases.
Total revenue remains unchanged.
It depends on the income level of consumers.
#9
Which of the following goods is likely to have a more elastic demand?
Salt
Diamonds
Gasoline
Insulin
#10
What effect does the availability of close substitutes have on the price elasticity of demand?
It makes demand more inelastic.
It makes demand more elastic.
It has no effect on demand elasticity.
It makes demand perfectly elastic.
#11
What does it mean if the price elasticity of demand is zero?
Demand is perfectly elastic.
Demand is perfectly inelastic.
Demand is unit elastic.
Demand is inelastic.
#12
Which factor does NOT affect the price elasticity of demand?
Availability of substitutes.
Necessity of the good.
Time horizon considered.
Income level of consumers.
#13
What effect does a longer time horizon have on the price elasticity of demand?
It makes demand more elastic.
It makes demand more inelastic.
It has no effect on demand elasticity.
It makes demand perfectly elastic.
#14
What is the primary determinant of the price elasticity of supply?
The availability of substitutes.
The time horizon considered.
The proportion of income spent on the good.
The flexibility of producers to adjust production levels.
#15
Which of the following goods is likely to have a more elastic supply?
Handcrafted artisanal products.
Crude oil.
Water.
Antiques.
#16
What happens to the price elasticity of supply as the production time horizon increases?
It decreases.
It increases.
It remains constant.
It becomes perfectly elastic.
#17
What does it mean if the cross-price elasticity of two goods is positive?
They are substitutes.
They are complements.
The goods are unrelated.
The goods are inferior.
#18
What is the relationship between price elasticity of demand and total revenue?
They are always inversely related.
They are always directly related.
They are unrelated.
It depends on the elasticity of demand.
#19
If a good has a negative cross-price elasticity with another good, what does it mean?
They are substitutes.
They are complements.
The goods are unrelated.
The goods are inferior.
#20
If a product has a perfectly inelastic demand, what is its price elasticity of demand?
#21
What does a negative income elasticity of demand indicate?
The good is a necessity.
The good is an inferior good.
The good is a luxury.
The good is a normal good.
#22
If a product has a price elasticity of demand of -0.5, what can be said about its demand?
It is elastic.
It is inelastic.
It is perfectly inelastic.
It is unit elastic.
#23
What does it mean if the price elasticity of demand is greater than 1, but less than infinity?
Demand is perfectly elastic.
Demand is elastic.
Demand is unit elastic.
Demand is inelastic.
#24
If the price elasticity of supply for a good is 0.8, what can be said about its supply?
It is elastic.
It is inelastic.
It is perfectly inelastic.
It is unit elastic.
#25
What effect does technological progress typically have on the price elasticity of supply for a product?
It decreases elasticity.
It increases elasticity.
It has no effect on elasticity.
It makes supply perfectly inelastic.