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