Price Elasticity of Demand Quiz

What does the law of demand state?

• If the price of a product falls, the demand will fall.

• If the price of a product falls, the demand will stay the same.

• If the price of a product increases, the demand will fall.

• If the price of a product increases, the demand will increase.

What is price elasticity of demand (PED) measuring?

• The change in quality due to price changes.

• The change in production cost due to price changes.

• The change in supply due to price changes.

• The responsiveness of demand to changes in price.

What is the formula for calculating PED?

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

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

• Percentage change in demand divided by percentage change in supply.

• Percentage change in supply divided by percentage change in demand.

If a business reduces its prices by 10% and the quantity demanded increases by 40%, what is the PED?

• -0.25

• 0.25

• 4

• -4

What does a PED value greater than 1 indicate?

• Perfectly inelastic demand

• Elastic demand

• Unitary elastic demand

• Inelastic demand

If prices increase by 20% and the quantity demanded falls by 4%, what is the PED?

• -0.2

• 0.2

• -5

• 5

What happens to revenue if a business with elastic demand increases its prices?

• Revenue will double.

• Revenue will stay the same.

• Revenue will fall.

• Revenue will increase.

What happens to revenue if a business with inelastic demand reduces its prices?

• Revenue will stay the same.

• Revenue will fall.

• Revenue will increase.

• Revenue will double.