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2.6 PED Progress Check (25 MCQ's)

Authored by Caroline Yearwood

Social Studies

10th Grade

Used 2+ times

2.6 PED Progress Check (25 MCQ's)
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25 questions

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1.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

A business decides to reduce the selling price of its product by 5%. Identify the effect this would have.

If the price elasticity of demand is greater than 1, the total revenue would increase.

If the price elasticity of demand is less than 1, the quantity sold would decrease.

If the price elasticity of demand is greater than 1, the business would make more profit.

If the price elasticity of demand is greater than 1, the business’ costs would decrease.

Answer explanation

Explanation

If the price elasticity of demand is greater than 1, the demand for the product is price elastic, so the decrease in selling price will mean relatively more of the product will be sold.

revenue = selling price × quantity of products sold

With an increase in the quantity of products sold, the revenue would increase.

Kognity Question

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If PED of a good or service is inelastic, what pricing decisions should businesses take?

Businesses should decrease their prices

Businesses should make no changes to prices

Businesses should increase their prices

Businesses should decrease their price and supply

Answer explanation

Explanation

Option #1 is correct as if PED of a good or service is inelastic, the quantity demanded is less responsive to increase in price. An increase in price causes a relatively smaller decrease in quantity demanded, hence sales/total revenues will increase, so options #2 and #4 are incorrect. Option #3 is also incorrect, as it is important for businesses to increase their prices if the product is inelastic to generate greater revenue.

Kognity

3.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

PED calculations show us that demand for water bottles is price elastic. What will be the impact on total revenue if the price of water bottles increases?

Total revenue will decrease

Total revenue will increase

Total revenue will not be impacted

Total revenue will indefinitely increase

Answer explanation

Option #1 is correct, as if PED for water bottles is price elastic this means that quantity demanded is more responsive to increase in price. An increase in price causes a relatively larger decrease in quantity demanded, hence sales/total revenues will fall, thus the other options are incorrect.

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the product of price and quantity?

Total revenue

Total tax

Supply

Income

Answer explanation

Option #1 is correct, as total revenue is the amount of money received by a business from selling its goods and services. The formula to calculate sales revenue is as follows:

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the price elasticity of demand for a product that is highly sought after and has many close substitutes?

Equal to 0

Equal to 1

Less than 1

More than 1

Answer explanation

Option #1 is correct, as when PED > 1 we say that demand is price elastic, as demand is relatively responsive to price. It means that consumers are relatively sensitive to price changes, thus options #3 and #4 are incorrect. Option #2 is for inelastic goods, as they have a PED of less than 1

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Medicines are considered to be necessities. What is the price elasticity of demand for medicines?

Elastic

Unit elastic

Inelastic

Unit inelastic

Answer explanation

Necessities are goods or services important and essential in our lives. Demand for goods such as medicines tends to be inelastic, which is why option #1 is correct. Medication drugs such as insulin for diabetes patients are a necessity. If the price of insulin increases, there will be a relatively small impact on quantity demanded for that good. Demand will be less responsive to an increase in the price of insulin. The proportionate decrease in demand will be smaller than the proportionate increase in the price of insulin, thus the other options are incorrect.       

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What factor is likely to make the demand for a product elastic?

Availability of substitutes
Low income of consumers
Low price of the product
High price of the product

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