#1
Which of the following best defines the law of demand?
As the price of a good decreases, the quantity demanded increases.
ExplanationInverse relationship between price and quantity demanded.
#2
What is the formula for price elasticity of demand?
Percentage change in price / Percentage change in quantity demanded
ExplanationMeasure of responsiveness of quantity demanded to price changes.
#3
Which of the following factors does NOT affect the price elasticity of demand?
Number of sellers
ExplanationFactors influencing demand elasticity.
#4
What does it mean if the price elasticity of demand is perfectly inelastic?
Quantity demanded is unaffected by changes in price.
ExplanationExtreme inflexibility in quantity demanded.
#5
Which of the following is a characteristic of perfectly elastic demand?
The demand curve is horizontal.
ExplanationExtremely responsive demand with an infinite elasticity value.
#6
If the price of a product increases by 10% and the quantity demanded decreases by 15%, what is the price elasticity of demand?
1.67
ExplanationCalculation of elasticity based on percentage changes in price and quantity.
#7
What does it mean if the price elasticity of demand is unitary elastic?
The percentage change in quantity demanded equals the percentage change in price.
ExplanationEqual proportionate changes in quantity demanded and price.
#8
What does a price elasticity of demand greater than 1 indicate?
Demand is elastic.
ExplanationSensitivity of demand to price changes.
#9
If the income elasticity of demand for a good is negative, what does it indicate about the good?
It is an inferior good.
ExplanationGoods for which demand decreases as income increases.
#10
If the cross-price elasticity of demand between two goods is positive, what kind of relationship do they have?
They are complementary goods.
ExplanationGoods that are typically consumed together.
#11
What does it indicate if the price elasticity of supply is less than 1?
Supply is inelastic.
ExplanationInsensitivity of supply to price changes.
#12
What does it mean if the income elasticity of demand for a good is greater than 1?
It is a luxury good.
ExplanationGoods for which demand increases more than proportionally with income.
#13
If the price elasticity of supply is greater than 1, what does it indicate about the supply of the good?
Supply is elastic.
ExplanationHigh responsiveness of supply to price changes.
#14
What does it mean if the cross-price elasticity of demand is negative?
The goods are complementary.
ExplanationInverse relationship in demand between two goods.
#15
What does a cross-price elasticity of demand of 0 indicate between two goods?
There is no relationship between the goods.
ExplanationAbsence of connection in demand between two goods.
#16
If the demand for a good is price elastic, what happens to total revenue when the price increases?
Total revenue decreases.
ExplanationImpact of price changes on total revenue with elastic demand.
#17
What is the formula for income elasticity of demand?
Percentage change in income / Percentage change in quantity demanded
ExplanationMeasure of responsiveness of quantity demanded to changes in income.
#18
What does it mean if the price elasticity of demand is greater than 1 in absolute value?
Demand is elastic.
ExplanationHigh sensitivity of demand to price changes.
#19
What does it mean if the price elasticity of demand is zero?
Demand is perfectly inelastic.
ExplanationNo change in quantity demanded with any change in price.