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