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Elasticity of Demand
Contributed by: Porter
  • 1. What does the price elasticity of demand measure?
A) Profit margin of a product
B) Average price 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) Unitary elastic demand
B) Perfectly inelastic demand
C) No demand for the product
D) Perfectly elastic demand
  • 3. If a good has a lot of close substitutes, the demand for this good is likely to be:
A) Elastic
B) Inelastic
C) Perfectly elastic
D) Unitary 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 increase advertising expenditure
B) To focus on product quality
C) To set optimal pricing strategies
D) To maximize production efficiency
  • 6. What is the main factor influencing the price elasticity of demand for a good or service?
A) Advertising budget
B) Consumer income
C) Availability of substitutes
D) Production cost
  • 7. If the income elasticity of a product is negative, what does this indicate?
A) Normal good
B) Giffen good
C) Luxury good
D) Inferior good
  • 8. 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
  • 9. If the cross-price elasticity between two goods is positive, what does this imply about their relationship?
A) Inferior goods
B) Substitutes
C) Complements
D) Normal goods
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