#1
What is price elasticity of demand?
A measure of how quantity demanded changes with a change in price
ExplanationMeasure of responsiveness of quantity demanded to price change
#2
Which of the following goods is likely to have the most elastic demand?
Designer handbags
ExplanationLuxury items with many substitutes
#3
What is cross-price elasticity of demand?
A measure of how quantity demanded changes with a change in the price of another good
ExplanationMeasure of responsiveness of demand to price change of another good
#4
If the price of a product increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?
0.5
ExplanationInelastic demand
#5
What is the relationship between total revenue and price elasticity of demand?
Total revenue is inversely proportional to price elasticity of demand
ExplanationAs price elasticity increases, total revenue decreases
#6
If the income elasticity of demand for a luxury good is 2, what does this indicate?
Demand for the good is elastic
ExplanationLuxury goods tend to have elastic demand
#7
Which of the following is not a determinant of price elasticity of demand?
Income level of consumers
ExplanationIncome level affects demand elasticity
#8
If the price elasticity of supply for a product is 0.5, how will producers respond to a 20% increase in price?
Supply will increase by 10%
ExplanationInelastic supply response to price change