Understanding Price Elasticity: A Quiz on Demand and Supply

Which of the following is NOT a factor affecting the price elasticity of demand?

• Availability of close substitutes

• Necessity of the product

• Time period considered

• Production technology used by firms

• 0.5

• 1.0

• 1.5

• 2.0

Which of the following factors would likely make the supply of a product more elastic?

• The product requires highly specialized labor.

• There is a lot of flexibility in the production process.

• The product is made from a rare material.

• The product takes a long time to produce.

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. If the quantity supplied of a product increases by 20% in response to a 10% increase in price, what is the price elasticity of supply?

• 0.5

• 1.0

• 2.0

• 4.0

Which of the following would likely cause the demand for a product to be more elastic?

• The product is considered a basic necessity.

• There are few substitutes available.

• The product accounts for a large portion of the consumer's budget.

• The product is bought infrequently.

If a product's price elasticity of demand is less than 1, the demand is said to be:

• Perfectly elastic

• Elastic

• Unit elastic

• Inelastic

A product's price elasticity of supply can be affected by:

• The amount of time producers have to adjust to price changes.

• The consumer's income level.

• The price elasticity of demand for the product.

• The number of uses for the product.

If the price of a good increases by 5% and the quantity demanded remains unchanged, what is the price elasticity of demand for this good?

• 0

• 0.5

• 1

• Infinite

Which of the following is a factor that affects the price elasticity of supply but not the price elasticity of demand?

• The availability of close substitutes

• The time period considered

• The mobility of factors of production

• The proportion of income spent on the good

When calculating the price elasticity of demand, which of the following formulas is used?