Elasticity of Demand Quiz

What is the formula for price elasticity of demand?

• Percentage change in quantity demanded / Percentage change in price

• Percentage change in price / Percentage change in quantity demanded

• Total change in quantity demanded / Total change in price

• Percentage change in quantity demanded * Percentage change in price

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

• Elastic demand

• Inelastic demand

• Perfectly elastic demand

• Unitary demand

What is perfectly inelastic demand?

• Quantity demanded decreases as price decreases

• Quantity demanded is not affected by changes in price

• Quantity demanded increases as price increases

• Quantity demanded remains constant regardless of the price change

Give an example of a product with perfectly inelastic demand.

• Bread

• Insulin

• Gasoline

• Smartphones

Explain the concept of perfectly elastic demand.

• Perfectly elastic demand occurs when the demand curve is downward sloping.

• Perfectly elastic demand occurs when a small change in price leads to an infinite change in quantity demanded.

• Perfectly elastic demand occurs when a large change in price leads to a small change in quantity demanded.

• Perfectly inelastic demand occurs when a small change in price leads to no change in quantity demanded.

What happens to the quantity demanded when the price increases in a perfectly elastic demand scenario?

• Quantity demanded becomes infinite

• Quantity demanded becomes zero

• Quantity demanded increases

• Quantity demanded remains the same

In country X the motorway system is toll-based, meaning that users pay a fee to use the motorways. Recently, in order to discourage the use of motorways and to increase the use of public transport between cities, the government of country X has suggested increasing the toll paid per mile by 50%. Write an analysis of the likely affects on S&D. Your answer should discuss the determinants of elasticity and how they apply to this scenario.