Elasticity of Demand - Test
  • 1. What does the price elasticity of demand measure?
A) Responsiveness of quantity demanded to a change in price
B) Profit margin of a product
C) Average price of a product
D) Total quantity demanded for a product
  • 2. What does an elasticity value of 0 indicate?
A) Perfectly elastic demand
B) No demand for the product
C) Unitary elastic demand
D) Perfectly inelastic demand
  • 3. If a good has a lot of close substitutes, the demand for this good is likely to be:
A) Elastic
B) Inelastic
C) Unitary elastic
D) Perfectly elastic
  • 4. How does the short-term vs. long-term impact the price elasticity of demand for a product?
A) In the short-term, demand tends to be more elastic than in the long-term
B) In the short-term, demand tends to be less elastic than in the long-term
C) Time frame has no impact on price elasticity of demand
D) Short-term elasticity usually exceeds long-term elasticity
  • 5. Why is knowing the elasticity of demand important for businesses?
A) To maximize production efficiency
B) To set optimal pricing strategies
C) To increase advertising expenditure
D) To focus on product quality
  • 6. What is the main factor influencing the price elasticity of demand for a good or service?
A) Production cost
B) Advertising budget
C) Consumer income
D) Availability of substitutes
  • 7. If the income elasticity of a product is negative, what does this indicate?
A) Giffen good
B) Luxury good
C) Normal good
D) Inferior good
  • 8. What is the formula for calculating price elasticity of demand?
A) Percentage change in quantity demanded / Percentage change in price
B) Total quantity demanded * Price
C) Price / Quantity demanded
D) Change in demand / Change in price
  • 9. If the cross-price elasticity between two goods is positive, what does this imply about their relationship?
A) Complements
B) Substitutes
C) Inferior goods
D) Normal goods
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