Price Elasticity Concepts Quiz

It quantifies how much the quantity demanded changes in response to a change in price.

The elasticity is calculated as the percentage change in quantity demanded divided by the percentage change in price.

It gauges how much the quantity supplied changes in response to a change in price.

Luxury cars typically have more elastic demand as consumers are more responsive to price changes for non-essential items.

An elasticity less than 1 implies inelastic demand, meaning quantity demanded is less responsive to price changes.

The formula expresses how much quantity demanded changes in response to a percentage change in price.

The negative sign indicates an inverse relationship, and the magnitude greater than 1 suggests relatively elastic demand.

Consumers show no responsiveness to changes in price; quantity demanded remains constant regardless of price changes.

The price of complementary goods does not directly impact the responsiveness of quantity demanded to a change in price.

Elasticity is calculated as the percentage change in quantity demanded divided by the percentage change in price.

A positive cross-price elasticity suggests that an increase in the price of one product leads to an increase in demand for the other, indicating substitute goods.

A positive income elasticity less than 1 implies a normal good, as an increase in income leads to a less than proportionate increase in quantity demanded.

As price elasticity increases, total revenue moves in the opposite direction; when demand is elastic, lowering prices increases revenue.

An elasticity greater than 1 indicates elastic demand, meaning quantity demanded is responsive to price changes.

In perfectly elastic demand, consumers are willing to buy any quantity at a specific price, resulting in a vertical demand curve.