#1
What is price elasticity of demand?
The measure of how much the quantity demanded of a good responds to a change in the price of that good.
The measure of how much the quantity supplied of a good responds to a change in the price of that good.
The measure of how much the demand for a good changes when consumer income changes.
The measure of how much the demand for a good changes when the price of a substitute good changes.
#2
If the price elasticity of demand for a good is greater than 1, it means that the demand is:
Perfectly inelastic
Inelastic
Unit elastic
Elastic
#3
What does a price elasticity of -0.5 imply?
Demand is elastic
Demand is inelastic
Demand is unitary elastic
Demand is perfectly elastic
#4
Which of the following goods is likely to have a higher price elasticity of demand?
Necessities
Luxuries
Complementary goods
Goods with fewer substitutes
#5
Which of the following statements is true regarding the relationship between price elasticity and total revenue?
When demand is elastic, an increase in price decreases total revenue.
When demand is inelastic, an increase in price increases total revenue.
When demand is unitary elastic, total revenue remains constant regardless of price changes.
When demand is perfectly elastic, total revenue is maximized at any price level.
#6
What happens to total revenue if a firm decreases its price and the demand is elastic?
Total revenue increases
Total revenue decreases
Total revenue remains constant
The effect on total revenue cannot be determined without more information
#7
Which of the following factors affects price elasticity of demand?
Availability of substitutes
Income of consumers
Price of complementary goods
All of the above
#8
How can a firm increase total revenue if demand is inelastic?
Decrease price
Increase price
No change in price
Price elasticity does not affect total revenue
#9
What is the formula to calculate price elasticity of demand using percentage changes?
((% Change in Quantity Demanded) / (% Change in Price)) * 100
((% Change in Price) / (% Change in Quantity Demanded)) * 100
((Initial Quantity Demanded - Final Quantity Demanded) / (Initial Price - Final Price)) * 100
((Initial Price - Final Price) / (Initial Quantity Demanded - Final Quantity Demanded)) * 100
#10
If the cross-price elasticity of demand between two goods is negative, what can be said about their relationship?
They are complementary goods
They are substitute goods
There is no relationship between them
There is insufficient information to determine
#11
Which of the following is an example of a product with perfectly inelastic demand?
Gasoline in the short run
Luxury cars
Restaurant meals
Movie tickets
#12
If the price of good X increases and, as a result, the demand for good Y increases, what can be concluded about the goods X and Y?
They are complementary goods
They are substitute goods
There is no relationship between them
There is insufficient information to determine
#13
If the price of a product increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?
#14
Why might a perfectly elastic demand curve be unrealistic in the real world?
Consumers have perfect information about prices
There are no substitutes for the good
Consumers are highly responsive to price changes
The quantity demanded does not change with price
#15
What is the relationship between price elasticity and the slope of the demand curve?
Price elasticity and slope are inversely related.
Price elasticity and slope are directly related.
Price elasticity and slope are unrelated.
Price elasticity determines the shape of the demand curve.
#16
What is an example of a good with perfectly elastic demand?
Bottled water
Gasoline
Unique artwork
None of the above