Econ Quiz March 21st

Price elasticity of demand is calculated as

• change in quantity demanded divided by change in quantity supplied
• change in quantity demanded divided by change in price
• percentage change in quantity demanded divided by percentage change in quantity supplied
• change in price divided by change in quantity demanded
• percentage change in quantity demanded divided by percentage change in price

For a downward-sloping demand curve, price elasticity of demand is ALWAYS

• zero
• constant
• negative
• inelastic
• unit elastic

What does price elasticity of demand measure?

• consumers’ maximum willingness to pay
• price changes over a time period
• consumers’ responsiveness to price fluctuations
• suppliers’ responsiveness to demand
• the degree of stability of market equilibrium

Demand is inelastic when a 1% change in price results in a

• 1% decrease in demand
• drop in demand to zero
• 3% decrease in demand
• 3% increase in demand
• 0.5% decrease in demand

High price sensitivity is MOST associated with

• a relatively flat demand curve
• fluctuating elasticity along the demand curve
• low price elasticity of demand
• a vertical demand curve
• an inelastic demand curve

Which of the following characteristics leads to a higher price elasticity of demand?

• The good has no close substitutes.
• The good is defined in terms of a broad market.
• The good is produced by a monopoly.
• The good is a necessity.
• The good is considered a luxury item.

Which of the following explanations BEST describes why Coke would have a high price elasticity of demand?

• Coke is produced by a large company.
• Coke is marketed toward younger audiences.
• Coke is a necessity.
• Coke is very cheap.
• Coke tastes very similar to Pepsi.

A 10% change in the price of movie tickets results in a 20% change in demand. What is the price elasticity of demand?

• 10
• 20
• 1/2
• 2
• 4

If quantity demanded does not depend on price at all, we say that the good is

• Pareto optimal
• a public good
• perfectly elastic
• perfectly inelastic
• unit elastic

Why is the supply of airline flights relatively elastic?

• scarce resources
• close substitutes
• ease of entry
• short time horizon
• broad market definition