#1
What does price elasticity of demand measure?
The percentage change in quantity demanded given a one percent change in price.
ExplanationMeasures responsiveness of quantity demanded to price changes.
#2
If the price elasticity of demand is greater than 1, the demand is considered to be:
Elastic
ExplanationDemand is responsive to price changes.
#3
If the price of a good increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?
0.5
ExplanationLess than 1 indicates inelastic demand.
#4
Which of the following goods is likely to have the highest price elasticity of demand?
Insulin (for diabetic patients)
ExplanationNecessity with few substitutes.
#5
What does a price elasticity of demand of -0.8 indicate?
A 1% decrease in price will result in an 0.8% decrease in quantity demanded.
ExplanationNegative value indicates inverse relationship.
#6
Which of the following goods is most likely to have perfectly elastic demand?
Water
ExplanationAbundant with perfect substitutes.
#7
What is the formula for cross-price elasticity of demand?
Percentage change in price of good X * Percentage change in quantity demanded of good Y
ExplanationCalculates the responsiveness of quantity demanded of one good to the price change of another.
#8
If the cross-price elasticity of demand between two goods is positive, what does it indicate about the relationship between those goods?
They are substitutes.
ExplanationGoods are interchangeable.
#9
What does a price elasticity of demand equal to zero imply?
The demand is perfectly inelastic.
ExplanationQuantity demanded doesn't change with price.
#10
If the income elasticity of demand for a good is negative, what type of good is it?
Inferior good
ExplanationDemand decreases with increased income.
#11
What is the formula to calculate the price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationQuantifies responsiveness to price changes.
#12
If the cross-price elasticity of demand between two goods is negative, what does it imply about the relationship between those goods?
They are complements.
ExplanationGoods are consumed together.
#13
Which of the following is not a determinant of price elasticity of demand?
Income level of consumers
ExplanationIncome level affects demand, not elasticity.
#14
When does the cross-price elasticity of demand equal zero?
When the goods are unrelated.
ExplanationNo relationship between goods.
#15
What is the main implication of a perfectly inelastic demand curve?
The demand curve is vertical.
ExplanationPrice changes have no effect on quantity.
#16
What does a price elasticity of demand of -1.5 indicate?
The demand is perfectly elastic.
ExplanationInfinite responsiveness to price changes.
#17
What does a price elasticity of demand of 0.1 indicate?
The demand is inelastic.
ExplanationLess than 1 indicates inelasticity.