Online Quiz - Price Elasticity of Demand 2

What is price elasticity of demand?

• Price elasticity of demand is the same as supply elasticity

• Price elasticity of demand measures the cost of producing goods

• Price elasticity of demand is a measure of consumer income

• Price elasticity of demand measures the responsiveness of quantity demanded to a change in price.

How is price elasticity of demand calculated?

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

• Total revenue divided by quantity demanded

• Fixed cost divided by variable cost

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

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

• Unitary demand

• Perfectly elastic demand

• Inelastic demand

• Elastic demand

What does it mean when the price elasticity of demand is less than 1?

• It means that the demand for the product is inelastic.

• It means that the demand for the product is elastic.

• It means that the demand for the product is perfectly elastic.

• It means that the demand for the product is unitary elastic.

What are the determinants of price elasticity of demand?

• Color of the product

• Consumer's age

• Brand popularity

• The determinants of price elasticity of demand include availability of substitutes, necessity or luxury, proportion of income spent, and time period.

Explain the concept of perfectly elastic demand.

• Perfectly elastic demand refers to a situation where the quantity demanded is infinitely responsive to price changes, resulting in a horizontal demand curve. This means that consumers will only buy a good at a specific price, and any increase in price will cause the quantity demanded to drop to zero.

• Perfectly elastic demand results in a vertical demand curve

• Perfectly elastic demand means that the quantity demanded is not affected by price changes

• Perfectly elastic demand means that consumers will buy any quantity of a good regardless of the price

Explain the concept of perfectly inelastic demand.

• Perfectly elastic demand occurs when the quantity demanded changes in response to a change in price.

• Perfectly inelastic demand occurs when the quantity demanded decreases in response to an increase in price.

• Perfectly inelastic demand occurs when the quantity demanded does not change in response to a change in price.

• Perfectly inelastic demand occurs when the quantity demanded increases in response to a decrease in price.

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

• Direct relationship

• Inverse relationship

• Random relationship

• No relationship

Give an example of a product with elastic demand.

• Gasoline is an example of a product with elastic demand, as consumers tend to reduce their consumption when the price increases and increase their consumption when the price decreases.

• Bottled water

• Medicine

• Electricity

Give an example of a product with inelastic demand.

• Luxury cars

• Designer clothing

• Insulin

• Jewelry