#1
Which of the following statements best defines demand elasticity?
The responsiveness of quantity demanded to changes in price.
ExplanationDemand elasticity measures how changes in price affect quantity demanded.
#2
Which formula represents the price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationPrice elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
#3
What does a negative price elasticity of demand indicate?
Demand is perfectly elastic.
ExplanationA negative price elasticity of demand indicates perfectly elastic demand, where any change in price leads to an infinite change in quantity demanded.
#4
What is the slope of a linear demand curve with perfectly elastic demand?
0
ExplanationA linear demand curve with perfectly elastic demand has a slope of zero, indicating that quantity demanded changes infinitely with any change in price.
#5
If a 10% decrease in price leads to a 20% increase in quantity demanded, what is the price elasticity of demand?
2
ExplanationPrice elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price.
#6
When demand is perfectly elastic, what does this imply?
Changes in price have no effect on quantity demanded.
ExplanationDemand is perfectly elastic when any change in price leads to an infinite change in quantity demanded.
#7
If the price of a product increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?
0.2
ExplanationPrice elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price.
#8
What does it mean when the price elasticity of demand is greater than 1?
Demand is elastic.
ExplanationWhen the price elasticity of demand is greater than 1, demand is considered elastic, meaning quantity demanded is highly responsive to price changes.
#9
If the price of a product increases by 10% and the quantity demanded remains unchanged, what is the price elasticity of demand?
undefined
ExplanationPrice elasticity of demand is undefined when the percentage change in quantity demanded is zero.
#10
Which of the following factors is likely to make demand for a product more elastic?
Availability of close substitutes.
ExplanationWhen close substitutes are available, consumers can easily switch products, making demand more elastic.
#11
In which scenario would demand be considered inelastic?
When the price elasticity of demand is less than 1.
ExplanationDemand is inelastic when the percentage change in quantity demanded is less than the percentage change in price.
#12
If the price of gasoline increases and the quantity demanded decreases only slightly, what can be inferred about the demand for gasoline?
Demand is inelastic.
ExplanationWhen a slight change in price leads to a relatively small change in quantity demanded, demand is considered inelastic.
#13
Which factor is NOT a determinant of the price elasticity of demand?
The amount of advertising for the good.
ExplanationAdvertising does not directly affect the elasticity of demand.
#14
If the price elasticity of demand for a product is -0.5, how will a 10% increase in price affect quantity demanded?
Quantity demanded will increase by 10%.
ExplanationWith a negative price elasticity of demand, an increase in price leads to an increase in quantity demanded.