#1
Which of the following best describes price elasticity of demand?
A measure of how much quantity demanded responds to a change in price.
ExplanationMeasure of responsiveness of quantity demanded to price changes.
#2
If a product has an elastic demand, what does it mean?
Consumers are highly responsive to changes in price.
ExplanationConsumers are highly responsive to price changes.
#3
What is the formula to calculate price elasticity of demand?
Percentage change in quantity demanded divided by percentage change in price.
ExplanationChange in quantity demanded divided by change in price.
#4
If a good has a price elasticity of demand of -2, what does it indicate?
Demand is elastic.
ExplanationDemand is elastic when elasticity is greater than 1.
#5
Which of the following factors affects the price elasticity of demand?
All of the above.
ExplanationPrice elasticity is affected by all listed factors.
#6
What does it mean if the price elasticity of demand is greater than 1?
Demand is elastic.
ExplanationElastic demand when elasticity is greater than 1.
#7
What is the formula for calculating income elasticity of demand?
Percentage change in quantity demanded divided by percentage change in income.
ExplanationChange in quantity demanded divided by change in income.
#8
What does it mean if the cross-price elasticity of two goods is positive?
They are substitutes.
ExplanationGoods are substitutes if cross-price elasticity is positive.
#9
What is the relationship between price elasticity of demand and total revenue?
It depends on the elasticity of demand.
ExplanationTotal revenue change depends on demand elasticity.
#10
If a good has a negative cross-price elasticity with another good, what does it mean?
They are complements.
ExplanationGoods are complements if cross-price elasticity is negative.
#11
If a product has a perfectly inelastic demand, what is its price elasticity of demand?
0
ExplanationPrice elasticity is 0 for perfectly inelastic demand.
#12
What does a negative income elasticity of demand indicate?
The good is an inferior good.
ExplanationNegative income elasticity indicates inferior good.