Law of Demand and Elasticity Of Demand

According to the law of demand, when the price of a good increases:

Elasticity of demand measures

• The responsiveness of quantity demanded to changes in price

• The responsiveness of quantity supplied to changes in price

• The percentage change in quantity demanded compared to the percentage change in income

• The percentage change in quantity supplied compared to the percentage change in price

When demand is inelastic, a decrease in price will result in

• A proportionately larger decrease in quantity demanded

• A proportionately smaller decrease in quantity demanded

• No change in quantity demanded

• An infinite decrease in quantity demanded

An infinite decrease in quantity demanded

• Availability of substitutes

• Necessity of the good

• Income level of consumers

• Brand loyalty

If the price of a luxury car increases by 10% and the quantity demanded decreases by 15%, the demand for luxury cars is:

(a)  

The price elasticity of demand is calculated by dividing the percentage change in:

• Price by the percentage change in quantity demanded

• Quantity demanded by the percentage change in price

• Price by the percentage change in income

• Quantity demanded by the percentage change in income

Which scenario would likely result in an elastic demand for a good?

• A 5% increase in price leads to a 2% decrease in quantity demanded

• A 10% increase in price leads to a 10% decrease in quantity demanded

• A 20% increase in price leads to a 5% decrease in quantity demanded

• A 10% decrease in price leads to a 2% increase in quantity demanded

If the cross-price elasticity of two goods is positive, it indicates that they are:

• Complementary goods

• Substitute goods
  

• Inferior goods

• Unrelated goods

A perfectly elastic demand curve is:

If a good is considered a necessity, its demand is likely to be

(a)