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