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Price Elasticity of Demand and Cross-Price Elasticity Quiz

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What does price elasticity of demand measure?

The percentage change in quantity demanded given a one percent change in price.

Explanation

Measures responsiveness of quantity demanded to price changes.

If the price elasticity of demand is greater than 1, the demand is considered to be:

Elastic

Explanation

Demand is responsive to price changes.

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

Explanation

Less than 1 indicates inelastic demand.

Which of the following goods is likely to have the highest price elasticity of demand?

Insulin (for diabetic patients)

Explanation

Necessity with few substitutes.

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.

Explanation

Negative value indicates inverse relationship.

Which of the following goods is most likely to have perfectly elastic demand?

Water

Explanation

Abundant with perfect substitutes.

What does a cross-price elasticity of demand of 0.5 between two goods imply?

They are substitutes.

Explanation

Positive value indicates substitutability.

If the price of a good increases by 10% and the quantity demanded remains unchanged, what is the price elasticity of demand?

Explanation

No change in demand with price change.

If the price elasticity of demand for a good is -0.2, how does a 10% increase in price affect quantity demanded?

It decreases by 20%

Explanation

Inverse relationship between price and demand.

#10

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

Explanation

Calculates the responsiveness of quantity demanded of one good to the price change of another.

#11

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.

Explanation

Goods are interchangeable.

#12

What does a price elasticity of demand equal to zero imply?

The demand is perfectly inelastic.

Explanation

Quantity demanded doesn't change with price.

#13

If the income elasticity of demand for a good is negative, what type of good is it?

Inferior good

Explanation

Demand decreases with increased income.

#14

What is the formula to calculate the price elasticity of demand?

Percentage change in quantity demanded / Percentage change in price

Explanation

Quantifies responsiveness to price changes.

#15

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.

Explanation

Goods are consumed together.

#16

What does a price elasticity of demand of 1 indicate?

The demand is unitary elastic.

Explanation

Proportional change in quantity to price.

#17

If the income elasticity of demand for a good is 2, what type of good is it?

Normal good

Explanation

Demand increases with income.

#18

What does a price elasticity of demand of -∞ indicate?

The demand is perfectly elastic.

Explanation

Any price change results in no demand.

#19

If the cross-price elasticity of demand between two goods is -0.3, what does it imply about the relationship between those goods?

They are complements.

Explanation

Negative value indicates complementarity.

#20

Which of the following is not a determinant of price elasticity of demand?

Income level of consumers

Explanation

Income level affects demand, not elasticity.

#21

When does the cross-price elasticity of demand equal zero?

When the goods are unrelated.

Explanation

No relationship between goods.

#22

What is the main implication of a perfectly inelastic demand curve?

The demand curve is vertical.

Explanation

Price changes have no effect on quantity.

#23

What does a price elasticity of demand of -1.5 indicate?

The demand is perfectly elastic.

Explanation

Infinite responsiveness to price changes.

#24

What does a price elasticity of demand of 0.1 indicate?

The demand is inelastic.

Explanation

Less than 1 indicates inelasticity.

Price Elasticity of Demand and Cross-Price Elasticity Quiz

What does price elasticity of demand measure?

If the price elasticity of demand is greater than 1, the demand is considered to be:

If the price of a good increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?

Which of the following goods is likely to have the highest price elasticity of demand?

What does a price elasticity of demand of -0.8 indicate?

Which of the following goods is most likely to have perfectly elastic demand?

What does a cross-price elasticity of demand of 0.5 between two goods imply?

If the price of a good increases by 10% and the quantity demanded remains unchanged, what is the price elasticity of demand?

If the price elasticity of demand for a good is -0.2, how does a 10% increase in price affect quantity demanded?

What is the formula for cross-price elasticity of demand?

If the cross-price elasticity of demand between two goods is positive, what does it indicate about the relationship between those goods?

What does a price elasticity of demand equal to zero imply?

If the income elasticity of demand for a good is negative, what type of good is it?

What is the formula to calculate the price elasticity of demand?

If the cross-price elasticity of demand between two goods is negative, what does it imply about the relationship between those goods?

What does a price elasticity of demand of 1 indicate?

If the income elasticity of demand for a good is 2, what type of good is it?

What does a price elasticity of demand of -∞ indicate?

If the cross-price elasticity of demand between two goods is -0.3, what does it imply about the relationship between those goods?

Which of the following is not a determinant of price elasticity of demand?

When does the cross-price elasticity of demand equal zero?

What is the main implication of a perfectly inelastic demand curve?

What does a price elasticity of demand of -1.5 indicate?

What does a price elasticity of demand of 0.1 indicate?

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