- What is elasticity of demand?
a) The change in quantity demanded due to a change in income
b) The responsiveness of quantity demanded to changes in price
c) The change in quantity demanded due to a change in consumer preferences
d) The responsiveness of quantity demanded to changes in advertising
Answer: b) The responsiveness of quantity demanded to changes in price
- If the price elasticity of demand for a good is greater than 1, the demand is:
a) Perfectly elastic
b) Elastic
c) Inelastic
d) Unitary elastic
Answer: b) Elastic
- If the price elasticity of demand for a good is less than 1, the demand is:
a) Perfectly elastic
b) Elastic
c) Inelastic
d) Unitary elastic
Answer: c) Inelastic
- What does it mean when the price elasticity of demand is equal to 1?
a) The demand is perfectly elastic
b) The demand is elastic
c) The demand is inelastic
d) The demand is unitary elastic
Answer: d) The demand is unitary elastic
- Which of the following goods is likely to have a more elastic demand?
a) Necessities
b) Luxuries
c) Goods with few substitutes
d) Goods with many substitutes
Answer: d) Goods with many substitutes
- The price elasticity of demand tends to be higher in the __.
a) Short run
b) Long run
Answer: b) Long run
- If the cross elasticity of demand between two goods is positive, it indicates that they are:
a) Complementary goods
b) Substitute goods
c) Inferior goods
d) Normal goods
Answer: b) Substitute goods
- If the cross elasticity of demand between two goods is negative, it indicates that they are:
a) Complementary goods
b) Substitute goods
c) Inferior goods
d) Normal goods
Answer: a) Complementary goods
- Cross elasticity of demand measures the responsiveness of:
a) Quantity demanded of one good to a change in the price of another good
b) Quantity demanded to changes in income
c) Quantity supplied to changes in price
d) Quantity demanded to changes in advertising
Answer: a) Quantity demanded of one good to a change in the price of another good
- The income elasticity of demand measures the responsiveness of:
a) Quantity demanded to changes in price
b) Quantity demanded to changes in advertising
c) Quantity demanded to changes in income
d) Quantity supplied to changes in price
Answer: c) Quantity demanded to changes in income
- Which of the following goods is likely to have a positive income elasticity of demand?
a) Luxury goods
b) Necessities
c) Inferior goods
d) Generic goods
Answer: a) Luxury goods
- Which of the following goods is likely to have a negative income elasticity of demand?
a) Luxury goods
b) Necessities
c) Inferior goods
d) Generic goods
Answer: c) Inferior goods
- If the income elasticity of demand for a good is greater than 1, the good is:
a) A normal good
b) An inferior good
c) A Giffen good
d) A Veblen good
Answer: a) A normal good
- If the income elasticity of demand for a good is less than 1, the good is:
a) A normal good
b) An inferior good
c) A Giffen good
d) A Veblen good
Answer: b) An inferior good
- The formula for calculating price elasticity of demand is:
a) % change in quantity demanded / % change in price
b) % change in price / % change in quantity demanded
c) % change in quantity demanded x % change in price
d) % change in price x % change in quantity demanded
Answer: a) % change in quantity demanded / % change in price
- Elastic demand is represented by a price elasticity coefficient of:
a) 0
b) 1
c) Less than 1
d) Greater than 1
Answer: d) Greater than 1
- Inelastic demand is represented by a price elasticity coefficient of:
a) 0
b) 1
c) Less than 1
d) Greater than 1
Answer: c) Less than 1
- Perfectly elastic demand is represented by a price elasticity coefficient of:
a) 0
b) 1
c) Infinity
d) Greater than 1
Answer: c) Infinity
- Perfectly inelastic demand is represented by a price elasticity coefficient of:
a) 0
b) 1
c) Infinity
d) Greater than 1
Answer: a) 0
- Which of the following goods is likely to have perfectly elastic demand?
a) Gasoline at a single gas station in a remote area
b) Bottled water during a water shortage
c) Prescription medicine for a life-threatening condition
d) Branded designer clothing
Answer: a) Gasoline at a single gas station in a remote area
- Which of the following goods is likely to have perfectly inelastic demand?
a) Gasoline at a single gas station in a remote area
b) Bottled water during a water shortage
c) Prescription medicine for a life-threatening condition
d) Branded designer clothing
Answer: c) Prescription medicine for a life-threatening condition
- When a small change in price leads to a proportionally larger change in quantity demanded, the demand is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
- When a small change in price leads to a proportionally smaller change in quantity demanded, the demand is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly inelastic
Answer: b) Inelastic
- The price elasticity of demand for a good is likely to be higher in the long run if:
a) The good has many substitutes
b) The good is a luxury item
c) The good is a necessity
d) The good is an inferior good
Answer: a) The good has many substitutes
- The price elasticity of demand for a good is likely to be lower in the long run if:
a) The good has many substitutes
b) The good is a luxury item
c) The good is a necessity
d) The good is an inferior good
Answer: c) The good is a necessity
- If the price of a good increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?
a) 0.5
b) 1
c) 2
d) 3
Answer: a) 0.5
- If the price of a good increases by 5% and the quantity demanded decreases by 10%, what is the price elasticity of demand?
a) 0.5
b) 1
c) 2
d) 3
Answer: c) 2
- If the price of a good decreases by 10% and the quantity demanded increases by 10%, what is the price elasticity of demand?
a) 0
b) 1
c) 2
d) 3
Answer: b) 1
- If the price of a good decreases by 10% and the total revenue (price x quantity) increases, the demand is likely to be:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: b) Inelastic
- If the price of a good decreases by 10% and the total revenue (price x quantity) remains unchanged, the demand is likely to be:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: c) Unitary elastic
- If the price of a good decreases by 10% and the total revenue (price x quantity) decreases, the demand is likely to be:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
- If the price elasticity of demand for a good is -0.5, what is the percentage change in quantity demanded when the price increases by 10%?
a) 5%
b) -5%
c) -10%
d) -15%
Answer: b) -5%
- If the price elasticity of demand for a good is -2.5, what is the percentage change in quantity demanded when the price increases by 10%?
a) 5%
b) -5%
c) -10%
d) -25%
Answer: d) -25%
- If the price elasticity of demand for a good is -1.0, what is the percentage change in quantity demanded when the price decreases by 20%?
a) 20%
b) -20%
c) -40%
d) -50%
Answer: a) 20%
- If the price elasticity of demand for a good is -3.0, what is the percentage change in quantity demanded when the price decreases by 20%?
a) 20%
b) -20%
c) -40%
d) -60%
Answer: d) -60%
- The concept of elasticity was introduced by:
a) Adam Smith
b) John Maynard Keynes
c) Alfred Marshall
d) Karl Marx
Answer: c) Alfred Marshall
- Elasticity is a measure of the __ of demand to changes in its determinants.
a) Sensitivity
b) Responsiveness
c) Stability
d) Rigidity
Answer: b) Responsiveness
- If the price of a good increases by 20% and the quantity demanded decreases by 20%, the price elasticity of demand is:
a) 0.5
b) 1
c) 1.2
d) 1.5
Answer: b) 1
- If the price of a good increases by 20% and the quantity demanded remains unchanged, the price elasticity of demand is:
a) 0
b) 0.5
c) 1
d) Infinity
Answer: d) Infinity
- The price elasticity of demand is always __ for a straight-line demand curve.
a) Zero
b) Positive
c) Negative
d) Equal to one
Answer: b) Positive
- If the price of a good increases by 10%, and the quantity demanded decreases by 10%, the price elasticity of demand is:
a) 0.1
b) 1
c) -1
d) -0.1
Answer: d) -0.1
- The formula for calculating cross elasticity of demand is:
a) % change in quantity demanded of one good / % change in price of another good
b) % change in price of one good / % change in quantity demanded of another good
c) % change in quantity demanded of one good x % change in price of another good
d) % change in price of one good x % change in quantity demanded of another good
Answer: a) % change in quantity demanded of one good / % change in price of another good
- The cross elasticity of demand between two goods is positive if they are:
a) Complementary goods
b) Substitute goods
c) Independent goods
d) Inferior goods
Answer: b) Substitute goods
- The cross elasticity of demand between two goods is negative if they are:
a) Complementary goods
b) Substitute goods
c) Independent goods
d) Inferior goods
Answer: a) Complementary goods
- The formula for calculating income elasticity of demand is:
a) % change in quantity demanded / % change in income
b) % change in income / % change in quantity demanded
c) % change in quantity demanded x % change in income
d) % change in income x % change in quantity demanded
Answer: a) % change in quantity demanded / % change in income
- Which of the following goods is likely to have a higher income elasticity of demand?
a) Cars
b) Salt
c) Bread
d) Staple foods
Answer: a) Cars
- Which of the following goods is likely to have a lower income elasticity of demand?
a) Cars
b) Salt
c) Bread
d) Staple foods
Answer: d) Staple foods
- If the income elasticity of demand for a good is 0.8, the good is considered:
a) A necessity
b) A luxury
c) An inferior good
d) A normal good
Answer: a) A necessity
- If the income elasticity of demand for a good is -1.2, the good is considered:
a) A necessity
b) A luxury
c) An inferior good
d) A normal good
Answer: b) A luxury
- Which of the following factors affects the price elasticity of demand for a good?
a) Number of substitutes
b) Time period considered
c) Necessity vs. luxury
d) All of the above
Answer: d) All of the above
