Principles of Market Demand and Elasticity Quiz

Test your understanding of demand elasticity with 11 questions on law of demand, Giffen goods, cross-price elasticity, total revenue, and more.

Practice Learn Test

1. What is the law of demand?

As the price increases, the quantity demanded increases.

As the price decreases, the quantity demanded increases.

As the price increases, the quantity demanded decreases.

As the price decreases, the quantity demanded decreases.

2. What is elasticity of demand?

A measure of how much the quantity demanded of a good responds to changes in income.

A measure of how much the quantity demanded of a good responds to changes in the price of that good.

The total quantity demanded in the market.

The percentage change in the quantity demanded divided by the percentage change in price.

3. 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

1.0

2.0

0.2

6. What does the cross-price elasticity of demand measure?

The responsiveness of quantity demanded to a change in the price of the same good.

The responsiveness of quantity demanded to a change in the price of a different good.

The total quantity demanded in the market.

The percentage change in quantity demanded divided by the percentage change in income.

8. What is the relationship between elasticity and total revenue?

Elastic demand results in higher total revenue.

Inelastic demand results in higher total revenue.

Elasticity and total revenue are not related.

The relationship depends on the type of good.

10. How does the concept of time affect the elasticity of demand?

Demand becomes more elastic over time.

Demand becomes less elastic over time.

Time has no impact on demand elasticity.

The impact of time on elasticity varies depending on the good.

4. What is a Giffen good?

A good for which demand decreases as income decreases.

A good for which demand increases as income increases.

A good with elastic demand.

A good with inelastic demand.

5. Which of the following factors does not affect the elasticity of demand?

Availability of substitutes.

Necessity of the good.

Time horizon.

Total revenue of the seller.

7. If the income elasticity of demand for a luxury good is 1.5, what does this indicate about the good?

It is a normal good.

It is an inferior good.

It is a necessity.

It is a Giffen good.

#10

9. Which of the following is an example of a perfectly elastic demand?

Gasoline in the short run.

Luxury cars.

Unique artwork.

Homogeneous agricultural products.

#11

11. What is the midpoint formula for calculating the price elasticity of demand?

[(Q2 - Q1) / (Q1 + Q2)] / [(P2 - P1) / (P1 + P2)]

[(Q2 - Q1) / (Q1 + Q2)] * [(P2 - P1) / (P1 + P2)]

[(Q2 - Q1) * (P1 + P2)] / [(Q1 + Q2) * (P2 - P1)]

[(Q2 - Q1) * (P1 + P2)] * [(Q1 + Q2) * (P2 - P1)]