#1
In economics, what does the term 'elasticity' measure?
The responsiveness of quantity demanded to changes in price
ExplanationMeasure of responsiveness of quantity demanded to price changes.
#2
What is the formula to calculate price elasticity of demand (Ed)?
Ed = (ΔP/ΔQ) * (P/Q)
ExplanationChange in quantity demanded over change in price, scaled by initial quantity and price.
#3
What is the primary determinant of the price elasticity of demand?
The availability of substitutes
ExplanationPresence and closeness of substitute goods impacting elasticity.
#4
What does a price elasticity of demand (Ed) value of 0 indicate?
Demand is perfectly inelastic
ExplanationQuantity demanded does not change with price.
#5
What does it mean when the price elasticity of demand is greater than 1?
Demand is elastic
ExplanationQuantity demanded is highly responsive to price changes.
#6
Which of the following indicates perfectly inelastic demand?
Ed = 0
ExplanationPrice elasticity of demand equals zero.
#7
What does a price elasticity of demand (Ed) value of -2 indicate?
Demand is elastic
ExplanationHighly responsive demand to price changes.
#8
Which of the following represents perfectly elastic demand?
A horizontal demand curve
ExplanationDemand curve parallel to the price axis.
#9
What does a price elasticity of supply (Es) value of 0.5 indicate?
Supply is elastic
ExplanationRelatively responsive supply to price changes.
#10
Which of the following is a characteristic of perfectly elastic demand?
The demand curve is horizontal
ExplanationDemand curve flat at a certain price level.
#11
If the price of a good increases by 10% and the quantity demanded decreases by 15%, what is the price elasticity of demand (Ed)?
-0.67
ExplanationInelastic demand: absolute value of elasticity less than 1.
#12
When is the price elasticity of supply (Es) likely to be greater than 1?
In the long run for durable goods
ExplanationLong-run elasticity for durable goods.
#13
Which of the following factors influences the price elasticity of demand?
Availability of close substitutes
ExplanationPresence of close alternatives affecting demand elasticity.
#14
When might a product exhibit perfectly inelastic supply?
When the production process is highly automated
ExplanationSupply not affected by price changes due to automation.
#15
What is the relationship between price elasticity of demand and total revenue?
They have an inverse relationship
ExplanationAs elasticity changes, total revenue moves inversely.
#16
What happens to total revenue when demand is elastic and price increases?
Total revenue decreases
ExplanationIncrease in price leads to a decrease in total revenue due to elastic demand.
#17
What does a price elasticity of supply (Es) value of 1 indicate?
Supply is unitary elastic
ExplanationPercentage change in quantity supplied equals percentage change in price.