#1
Which of the following best defines the law of demand?
As the price of a good increases, the quantity demanded increases.
As the price of a good decreases, the quantity demanded decreases.
As the price of a good increases, the quantity demanded decreases.
As the price of a good decreases, the quantity demanded increases.
#2
What is the formula for price elasticity of demand?
Change in quantity demanded / Change in price
Change in price / Change in quantity demanded
Percentage change in quantity demanded / Percentage change in price
Percentage change in price / Percentage change in quantity demanded
#3
Which of the following factors does NOT affect the price elasticity of demand?
Availability of substitutes
Time horizon
Income of consumers
Number of sellers
#4
What does it mean if the price elasticity of demand is perfectly inelastic?
Consumers are not responsive to changes in price.
Quantity demanded changes proportionally with changes in price.
Demand is extremely sensitive to changes in price.
Quantity demanded is unaffected by changes in price.
#5
Which of the following is a characteristic of perfectly elastic demand?
The demand curve is vertical.
The demand curve is horizontal.
The demand curve is downward sloping.
The demand curve is upward sloping.
#6
If the price of a product increases by 10% and the quantity demanded decreases by 15%, what is the price elasticity of demand?
#7
What does it mean if the price elasticity of demand is unitary elastic?
The demand curve is vertical.
The demand curve is horizontal.
The demand curve is a straight line passing through the origin.
The percentage change in quantity demanded equals the percentage change in price.
#8
What does a price elasticity of demand greater than 1 indicate?
Demand is perfectly inelastic.
Demand is elastic.
Demand is unitary elastic.
Demand is perfectly elastic.
#9
If the income elasticity of demand for a good is negative, what does it indicate about the good?
It is an inferior good.
It is a normal good.
It is a luxury good.
It is a substitute good.
#10
If the cross-price elasticity of demand between two goods is positive, what kind of relationship do they have?
They are complementary goods.
They are substitute goods.
They have no relationship.
They are normal goods.
#11
What does it indicate if the price elasticity of supply is less than 1?
Supply is inelastic.
Supply is elastic.
Supply is unitary elastic.
Supply is perfectly inelastic.
#12
What does it mean if the income elasticity of demand for a good is greater than 1?
It is a necessity good.
It is an inferior good.
It is a luxury good.
It is a normal good.
#13
If the price elasticity of supply is greater than 1, what does it indicate about the supply of the good?
Supply is perfectly inelastic.
Supply is inelastic.
Supply is unitary elastic.
Supply is elastic.
#14
What does it mean if the cross-price elasticity of demand is negative?
The goods are complementary.
The goods are substitutes.
There is no relationship between the goods.
Both goods are inferior.
#15
What does a cross-price elasticity of demand of 0 indicate between two goods?
They are complementary goods.
They are substitute goods.
There is no relationship between the goods.
They are luxury goods.
#16
If the demand for a good is price elastic, what happens to total revenue when the price increases?
Total revenue increases.
Total revenue decreases.
Total revenue remains constant.
It depends on the income of consumers.
#17
What is the formula for income elasticity of demand?
Percentage change in quantity demanded / Percentage change in income
Percentage change in income / Percentage change in quantity demanded
Change in quantity demanded / Change in income
Change in income / Change in quantity demanded
#18
What does it mean if the price elasticity of demand is greater than 1 in absolute value?
Demand is perfectly inelastic.
Demand is elastic.
Demand is unitary elastic.
Demand is perfectly elastic.
#19
What does it mean if the price elasticity of demand is zero?
Demand is perfectly inelastic.
Demand is elastic.
Demand is unitary elastic.
Demand is perfectly elastic.