#1
What is price elasticity of demand?
A measure of how responsive quantity demanded is to a change in price.
The total revenue earned by a firm.
The percentage change in quantity demanded divided by the percentage change in price.
The change in quantity demanded divided by the change in price.
#2
If demand is elastic, what happens to total revenue when price increases?
Total revenue increases.
Total revenue decreases.
Total revenue remains constant.
Total revenue may increase or decrease depending on the degree of elasticity.
#3
If price elasticity of demand is -0.5, demand is:
Elastic.
Inelastic.
Unitary elastic.
Perfectly elastic.
#4
How is price elasticity of demand calculated?
Percentage change in quantity demanded divided by percentage change in income.
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 income divided by percentage change in quantity demanded.
#5
What does a price elasticity of -1.5 indicate about demand?
Demand is elastic.
Demand is inelastic.
Demand is perfectly elastic.
Demand is perfectly inelastic.
#6
Which factor does NOT affect the price elasticity of demand?
Substitutability.
Necessity of the good.
Proportion of income spent on the good.
The cost of production.
#7
When demand is unitary elastic, what is the relationship between price and total revenue?
Total revenue increases.
Total revenue decreases.
Total revenue remains constant.
Total revenue fluctuates.
#8
What does a price elasticity of demand of -0.2 imply?
Demand is elastic.
Demand is inelastic.
Demand is unitary elastic.
Demand is perfectly inelastic.
#9
What happens to total revenue when demand is unitary elastic?
Total revenue increases.
Total revenue decreases.
Total revenue remains constant.
Total revenue becomes zero.
#10
Which of the following goods is likely to have the most elastic demand?
Bottled water
Insulin medication
Luxury cars
Salt
#11
If the price of a necessity such as bread increases, what happens to the total revenue earned by a bakery with inelastic demand?
Total revenue increases.
Total revenue decreases.
Total revenue remains constant.
Total revenue may increase or decrease.
#12
If the cross-price elasticity of demand between two goods is negative, what can be inferred about the relationship between the goods?
They are complementary goods.
They are substitute goods.
They are unrelated goods.
They are normal goods.
#13
What does a price elasticity of demand of 1.2 indicate about demand?
Demand is elastic.
Demand is inelastic.
Demand is perfectly elastic.
Demand is perfectly inelastic.
#14
Which of the following would likely have the most inelastic demand?
Airline tickets for holiday travel
Gasoline for everyday commuting
Fine dining at a luxury restaurant
Movie tickets for a blockbuster premiere
#15
What is the effect of a price increase on total revenue if demand is inelastic?
Total revenue increases.
Total revenue decreases.
Total revenue remains constant.
Total revenue becomes zero.
#16
What is the effect of a perfectly elastic demand on total revenue if price is increased?
Total revenue increases.
Total revenue decreases.
Total revenue remains constant.
Total revenue becomes zero.
#17
If price elasticity of demand is 0, demand is:
Perfectly elastic.
Perfectly inelastic.
Unitary elastic.
Inelastic.
#18
How does the time horizon affect price elasticity of demand?
In the short run, demand tends to be more elastic.
In the long run, demand tends to be more elastic.
The time horizon has no effect on price elasticity of demand.
In the short run, demand tends to be more inelastic.
#19
If a firm faces perfectly elastic demand, what is the effect of increasing price?
Total revenue increases.
Total revenue decreases.
Total revenue remains constant.
Total revenue becomes zero.
#20
What is the relationship between price elasticity of demand and revenue when demand is inelastic?
As price increases, revenue increases.
As price increases, revenue decreases.
As price decreases, revenue increases.
As price decreases, revenue decreases.
#21
What is the relationship between price elasticity and total revenue at the unitary elastic point?
Total revenue is maximized.
Total revenue is minimized.
Total revenue remains constant.
Total revenue becomes zero.
#22
If the price elasticity of demand is -2, a 10% decrease in price will result in what percentage change in quantity demanded?
5% increase
20% increase
20% decrease
50% decrease
#23
In which scenario would a firm prefer to have inelastic demand for its product?
During a recession
When there is a high degree of competition
When it wants to increase total revenue by raising prices
During a period of economic boom
#24
If the price of a product increases by 10% and the quantity demanded decreases by 15%, what is the price elasticity of demand?
#25
What is the relationship between price elasticity and total revenue at the point of unitary elasticity?
Total revenue is maximized.
Total revenue is minimized.
Total revenue remains constant.
Total revenue becomes zero.