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