Elasticity of Demand - Test
  • 1. What does the price elasticity of demand measure?
A) Total quantity demanded for a product
B) Average price of a product
C) Profit margin of a product
D) Responsiveness of quantity demanded to a change in price
  • 2. What does an elasticity value of 0 indicate?
A) No demand for the product
B) Perfectly elastic demand
C) Perfectly inelastic demand
D) Unitary elastic demand
  • 3. If a good has a lot of close substitutes, the demand for this good is likely to be:
A) Unitary elastic
B) Perfectly elastic
C) Inelastic
D) Elastic
  • 4. Why is knowing the elasticity of demand important for businesses?
A) To increase advertising expenditure
B) To set optimal pricing strategies
C) To maximize production efficiency
D) To focus on product quality
  • 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. If the cross-price elasticity between two goods is positive, what does this imply about their relationship?
A) Inferior goods
B) Substitutes
C) Complements
D) Normal goods
  • 7. What is the main factor influencing the price elasticity of demand for a good or service?
A) Advertising budget
B) Availability of substitutes
C) Production cost
D) Consumer income
  • 8. If the income elasticity of a product is negative, what does this indicate?
A) Giffen good
B) Inferior good
C) Normal good
D) Luxury good
  • 9. What is the formula for calculating price elasticity of demand?
A) Change in demand / Change in price
B) Total quantity demanded * Price
C) Percentage change in quantity demanded / Percentage change in price
D) Price / Quantity demanded
Created with That Quiz — the math test generation site with resources for other subject areas.