Price Elasticity of Demand Intro

1. The price elasticity of demand measures the:

• Change in price of a product.

• Responsiveness of quantity demanded to price changes.

• Change in quantity supplied of a product.

• Market share of a product.

1. A price elasticity of demand greater than 1 (in absolute value) indicates that demand is:

• Inelastic

• Elastic

• Unitary Elastic

• Constant

1. If a 10% decrease in price leads to a 20% increase in quantity demanded, the price elasticity of demand is:

• -0.5

• -1.5

• -2

• -10

1. A price elasticity of demand equal to -1 indicates that demand is:

• Inelastic

• Unitary Elastic

• Elastic

• Constant

1. Which scenario is an example of inelastic demand?

• A 20% increase in the price of a luxury car leads to a 25% decrease in quantity demanded.

• A 10% increase in the price of water leads to a 5% decrease in quantity demanded.

• A 30% decrease in the price of smartphones leads to a 40% increase in quantity demanded.

• A 5% increase in the price of movie tickets leads to a 15% decrease in quantity demanded.