Elasticity of Demand
  • 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) 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) Inelastic
B) Elastic
C) Perfectly elastic
D) Unitary elastic
  • 4. What is the formula for calculating price elasticity of demand?
A) Total quantity demanded * Price
B) Change in demand / Change in price
C) Percentage change in quantity demanded / Percentage change in price
D) Price / Quantity demanded
  • 5. If the income elasticity of a product is negative, what does this indicate?
A) Inferior good
B) Giffen good
C) Luxury good
D) Normal good
  • 6. If the cross-price elasticity between two goods is positive, what does this imply about their relationship?
A) Substitutes
B) Inferior goods
C) Normal goods
D) Complements
  • 7. 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
  • 8. Why is knowing the elasticity of demand important for businesses?
A) To maximize production efficiency
B) To set optimal pricing strategies
C) To focus on product quality
D) To increase advertising expenditure
  • 9. How does the short-term vs. long-term impact the price elasticity of demand for a product?
A) Time frame has no impact on price elasticity of demand
B) Short-term elasticity usually exceeds long-term elasticity
C) In the short-term, demand tends to be more elastic than in the long-term
D) In the short-term, demand tends to be less elastic than in the long-term
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