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