Question 1

What is the definition of elasticity of demand?

Accepted Answer

A measure of the responsiveness of quantity demanded to a change in price

Answer

The total amount of goods or services demanded at different price levels

Answer

The maximum price a consumer is willing to pay for a good or service

Answer

The ability of consumers to substitute one good for another

Question 2

Which of the following scenarios indicates elastic demand?

Accepted Answer

When a small increase in price leads to a large decrease in quantity demanded

Answer

When a large increase in price leads to a small decrease in quantity demanded

Answer

When there is no change in quantity demanded regardless of price

Answer

When a decrease in price leads to an increase in quantity demanded

Question 3

What is the formula for calculating price elasticity of demand?

Accepted Answer

Percentage change in quantity demanded / Percentage change in price

Answer

Total revenue / Total quantity demanded

Answer

Percentage change in price / Percentage change in quantity demanded

Answer

Total revenue / Percentage change in price

Question 4

Which of the following goods is most likely to have inelastic demand?

Accepted Answer

Medicine for life-threatening illnesses

Answer

Luxury cars

Answer

Fast food meals

Answer

Movie tickets

Question 5

What does it mean if the price elasticity of demand is greater than 1?

Accepted Answer

Demand is elastic

Answer

Demand is perfectly elastic

Answer

Demand is unitary elastic

Answer

Demand is inelastic

Question 6

What is the primary factor that determines the elasticity of demand for a good?

Accepted Answer

Availability of substitutes

Answer

Income level

Answer

Brand loyalty

Answer

Price level

Question 7

Which of the following is an example of a perfectly elastic demand?

Accepted Answer

A small increase in price leads to an infinite decrease in quantity demanded

Answer

A large increase in price leads to a small decrease in quantity demanded

Answer

A small increase in price leads to a small decrease in quantity demanded

Answer

There is no change in quantity demanded regardless of price

Question 8

Which of the following factors does NOT affect the elasticity of demand for a good?

Accepted Answer

Brand loyalty

Answer

Income level

Answer

Price level

Answer

Availability of substitutes

Question 9

Which of the following is an example of perfectly elastic demand?

Accepted Answer

a

Answer

Prescription medicine

Answer

Air travel tickets

Answer

Gasoline

Answer

Electricity

Question 10

Which of the following factors does NOT affect the elasticity of demand?

Accepted Answer

d

Answer

Availability of substitutes

Answer

Time period

Answer

Necessity of the product

Answer

Price of complementary goods

Question 11

Which of the following is true about inelastic demand?

Accepted Answer

b

Answer

A large change in price leads to a small change in quantity demanded.

Answer

A small change in price leads to a large change in quantity demanded.

Answer

A change in price does not affect quantity demanded.

Answer

A change in price results in no change in total revenue.

Question 12

Which of the following factors is most likely to make demand for a product more elastic?

Accepted Answer

c

Answer

A higher proportion of income spent on the product

Answer

A lack of close substitutes

Answer

A shorter time period

Answer

A necessity good

Question 13

Which of the following is an example of inelastic demand?

Accepted Answer

b

Answer

Luxury cars

Answer

Fast food

Answer

Movie tickets

Answer

Water

Question 14

Which of the following is a characteristic of elastic demand?

Accepted Answer

c

Answer

A small change in price leads to a large change in quantity demanded

Answer

The demand curve is vertical

Answer

The price elasticity of demand is always zero

Answer

A change in price has no effect on quantity demanded

Question 15

Which of the following is a determinant of price elasticity of demand?

Accepted Answer

b

Answer

Market competition

Answer

Production costs

Answer

Availability of complementary goods

Answer

Consumer income

Question 16

Which of the following factors is likely to make demand for a product more inelastic?

Accepted Answer

c

Answer

Low income elasticity

Answer

Longer time period

Answer

The product being a necessity

Answer

Availability of substitutes

Question 17

Which of the following is an example of a perfectly inelastic demand?

Accepted Answer

d

Answer

Insulin

Answer

Smartphones

Answer

Fast food

Answer

Clothing

Question 18

Which of the following is a characteristic of elastic supply?

Accepted Answer

b

Answer

The supply curve is horizontal

Answer

The price elasticity of supply is always zero

Answer

A change in price has no effect on quantity supplied

Answer

A small change in price leads to a large change in quantity supplied

Question 19

What is elasticity of demand?

Accepted Answer

It is a measure of how responsive the quantity demanded is to a change in price.

Answer

It is a measure of how responsive the quantity supplied is to a change in price.

Answer

It is a measure of how responsive the quantity demanded is to a change in income.

Answer

It is a measure of how responsive the quantity demanded is to a change in supply.

Question 20

Which of the following best describes a perfectly elastic demand?

Accepted Answer

A small change in price leads to an infinite change in quantity demanded.

Answer

A small change in price has no effect on quantity demanded.

Answer

A large change in price has a small effect on quantity demanded.

Answer

A change in price has an equal effect on quantity demanded.

Question 21

What is the formula for calculating price elasticity of demand?

Accepted Answer

Percentage change in quantity demanded divided by the percentage change in price.

Answer

Total change in quantity demanded divided by the total change in price.

Answer

Percentage change in price divided by the percentage change in quantity demanded.

Answer

Total change in price divided by the total change in quantity demanded.

Question 22

Which of the following represents a perfectly inelastic demand?

Accepted Answer

A change in price has no effect on quantity demanded.

Answer

A large change in price has a small effect on quantity demanded.

Answer

A change in price has an equal effect on quantity demanded.

Answer

A small change in price leads to a large change in quantity demanded.

Question 23

What is the relationship between price elasticity of demand and total revenue?

Accepted Answer

When demand is elastic, an increase in price leads to a decrease in total revenue.

Answer

When demand is elastic, an increase in price leads to an increase in total revenue.

Answer

When demand is inelastic, an increase in price leads to a decrease in total revenue.

Answer

When demand is inelastic, an increase in price leads to an increase in total revenue.

Question 24

Which of the following factors does NOT affect the elasticity of demand?

Accepted Answer

The cost of production.

Answer

The time period considered.

Answer

The availability of substitutes.

Answer

The necessity of the product.

Question 25

What does it mean if the price elasticity of demand is greater than 1?

Accepted Answer

It indicates that demand is elastic and highly responsive to changes in price.

Answer

It indicates that demand is inelastic and not responsive to changes in price.

Answer

It indicates that demand is perfectly inelastic and not responsive to changes in price.

Answer

It indicates that demand is perfectly elastic and extremely responsive to changes in price.

Question 26

Which of the following is true about perfectly elastic demand?

Accepted Answer

The price is fixed and any increase in quantity demanded must be met with an infinite decrease in price.

Answer

The quantity demanded is fixed and any increase in price must be met with an equal decrease in quantity demanded.

Answer

The price is fixed and any increase in quantity demanded must be met with an equal increase in price.

Answer

The price and quantity demanded are both fixed and cannot be changed.

Question 27

Which of the following factors is likely to make demand more elastic?

Accepted Answer

The availability of many close substitutes for the product.

Answer

The absence of substitutes for the product.

Answer

A shorter time period considered.

Answer

The necessity of the product for consumers.

Question 28

What is the price elasticity of demand when it is equal to 1?

Accepted Answer

Demand is unit elastic, meaning quantity demanded changes proportionally to changes in price.

Answer

Demand is inelastic, meaning quantity demanded changes less than proportionally to changes in price.

Answer

Demand is perfectly elastic, meaning a small change in price leads to an infinite change in quantity demanded.

Answer

Demand is perfectly inelastic, meaning quantity demanded remains constant regardless of price changes.

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