#1
What does price elasticity of demand measure?
The percentage change in quantity demanded divided by the percentage change in price
ExplanationMeasure of responsiveness of quantity demanded to changes in price.
#2
If the price elasticity of demand for a good is greater than 1, it means that the good is:
Luxury
ExplanationGoods for which demand increases more than proportionally as income rises.
#3
What is the primary determinant of the price elasticity of supply?
Time horizon
ExplanationExtent to which producers can adjust production in response to price changes.
#4
Which of the following factors does not affect the price elasticity of demand?
Cost of production
ExplanationA determinant affecting supply elasticity, not demand.
#5
If the cross-price elasticity of demand between two goods is negative, it means that they are:
Complements
ExplanationGoods whose demand decreases when the price of another good increases.
#6
What is the formula for calculating price elasticity of demand using the midpoint method?
(Change in price / Average price) / (Change in quantity demanded / Average quantity demanded)
ExplanationA method to calculate elasticity over a range of prices and quantities.
#7
When price elasticity of demand is greater than 1, demand is considered to be:
Elastic
ExplanationQuantity demanded is highly responsive to changes in price.
#8
Which of the following scenarios would likely result in a relatively elastic demand for a product?
There are many substitutes available for the product.
ExplanationConsumers have options to switch to other similar products.
#9
If the price of a product increases by 20% and the quantity demanded decreases by 10%, what is the price elasticity of demand?
2.0
ExplanationPercentage change in quantity demanded is twice the percentage change in price.
#10
What does a price elasticity of demand of -0.5 indicate?
Demand is relatively inelastic
ExplanationPercentage change in quantity demanded is less than the percentage change in price.
#11
Which of the following goods is likely to have the most elastic demand?
Diamonds
ExplanationLuxury goods with many substitutes.
#12
If the price elasticity of demand for a product is -0.75, what happens to total revenue when the price is increased?
Increases
ExplanationDespite price increase, the decrease in quantity demanded is proportionally smaller.
#13
If the price elasticity of demand for a product is -2, a 10% decrease in price would result in:
A 20% increase in quantity demanded.
ExplanationPercentage change in quantity demanded is twice the percentage change in price.
#14
What does a price elasticity of supply of 0.5 indicate?
Supply is relatively inelastic.
ExplanationPercentage change in quantity supplied is less than the percentage change in price.
#15
Which of the following goods is likely to have the most inelastic demand?
Insulin
ExplanationNecessity goods with limited substitutes.