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