Economics Concepts Quiz

What is price elasticity of demand?

• It's a measure of how quantity demanded changes with price.

• It's a measure of how quantity demanded changes with quality.

What is market equilibrium?

• A state where supply and demand for a good or service are balanced, resulting in a stable price.

• A state where supply and demand for a good or service are unpredictable, resulting in a fluctuating price.

Explain the law of supply and demand.

• The price of a good or service is determined by supply and demand.

• The price of a good or service is determined by supply only.

What is income elasticity of demand?

• It measures the responsiveness of quantity demanded to a change in population.

• It measures the responsiveness of quantity demanded to a change in income.

What factors affect price elasticity of demand?

• availability of substitutes, necessity or luxury, proportion of income spent, time period, and brand loyalty

• price of the product, advertising and marketing strategies, geographical location

How is market equilibrium determined?

• By random chance

• Intersection of demand and supply curves

What are the determinants of supply?

• Cost of production, technology, number of suppliers, expectations, and government policies.

• Population growth, income levels, inflation

What are the determinants of demand?

• Price, income, preferences, population, advertising, substitutes

• Price, income, preferences, population, advertising, complements

What is the formula for price elasticity of demand?

• Change in quantity demanded / Change in price

• Percentage change in quantity demanded / Percentage change in price

What happens to price and quantity when demand is elastic?

• Price and quantity move in the same direction

• Price and quantity move in opposite directions