#1
Which of the following best defines demand in economics?
The quantity of a good or service that consumers are willing and able to buy at a given price and time period
ExplanationDemand is the quantity consumers are willing and able to buy at a specific price and time.
#2
What does the law of demand state?
As price increases, quantity demanded decreases, holding all other factors constant
ExplanationThe law of demand asserts that as price rises, the quantity demanded decreases, assuming other factors remain unchanged.
#3
What is the formula for calculating price elasticity of demand (PED)?
PED = (Percentage change in quantity demanded) / (Percentage change in price)
ExplanationPED is calculated as the percentage change in quantity demanded divided by the percentage change in price.
#4
Which of the following is NOT a factor influencing the price elasticity of demand?
Price of complementary goods
ExplanationThe price of complementary goods is a factor affecting the demand for those goods, not the price elasticity of demand.
#5
Which of the following is NOT a determinant of producer supply?
Number of consumers
ExplanationThe number of consumers is not a determinant of producer supply; it is influenced by factors like technology, input prices, and expectations.
#6
Which of the following is NOT a determinant of demand?
Cost of production
ExplanationThe cost of production is a determinant of supply, not demand.
#7
What is the income effect in the context of demand?
The change in quantity demanded of a good due to a change in consumer income
ExplanationIncome effect refers to how a change in consumer income influences the quantity demanded of a good.
#8
What does the price elasticity of demand measure?
The percentage change in quantity demanded divided by the percentage change in price
ExplanationPrice elasticity of demand measures the proportional change in quantity demanded relative to the change in price.
#9
Which of the following goods is likely to have a more elastic demand?
Diamonds (luxury goods)
ExplanationLuxury goods like diamonds typically exhibit more elastic demand.
#10
When is demand said to be unit elastic?
When the price elasticity of demand is equal to 1
ExplanationUnit elastic demand occurs when the price elasticity is exactly 1.
#11
What is the difference between a change in quantity demanded and a change in demand?
A change in quantity demanded is a movement along the demand curve, while a change in demand is a shift of the entire curve
ExplanationQuantity demanded changes along the curve, while a change in demand shifts the entire curve.
#12
What does it mean if the cross-price elasticity of demand for two goods is negative?
The two goods are complements
ExplanationNegative cross-price elasticity indicates that the goods are complements, meaning an increase in the price of one decreases the demand for the other.
#13
What is the difference between elastic and inelastic demand?
Elastic demand is when quantity demanded changes proportionally more than the change in price, while inelastic demand is when quantity demanded changes proportionally less than the change in price
ExplanationElastic demand sees quantity demanded changing proportionally more than price, while inelastic demand sees less proportional change.
#14
What is the relationship between price elasticity of demand and total revenue?
When demand is elastic, an increase in price leads to an increase in total revenue
ExplanationIn elastic demand, a price increase results in higher total revenue.
#15
What does it mean if the price elasticity of demand for a good is -0.5?
Demand is inelastic
ExplanationA price elasticity of -0.5 indicates inelastic demand for the good.