3.3.2 Interpreting Elasticity of Demand

What does the price elasticity of a product measure?

• The amount of product sold

• The change in demand due to a price change

• The total revenue generated

• The cost of production

If the price elasticity of demand is greater than 1, the product is considered:

• Price inelastic

• Price elastic

• Unaffected by price changes

• Perfectly elastic

What is the formula for calculating price elasticity of demand?

• % change in price / % change in quantity demanded

• % change in quantity demanded / % change in price

• % change in revenue / % change in price

• % change in quantity supplied / % change in price

For price elastic products, the % change in demand is:

• Equal to the % change in price

• Less than the % change in price

• Greater than the % change in price

• Unrelated to the % change in price

For price inelastic products, the % change in demand is:

• Equal to the % change in price

• Less than the % change in price

• Greater than the % change in price

• Unrelated to the % change in price

If a product is price elastic, a price increase will make sales revenue:

• Go up

• Go down

• Stay the same

• Fluctuate randomly

If a product is price inelastic, a rise in price will make sales revenue:

• Go up

• Go down

• Stay the same

• Fluctuate randomly

What happens to sales revenue if the price of a price inelastic product is decreased?

• Sales revenue increases significantly

• Sales revenue decreases slightly

• Sales revenue remains unchanged

• Sales revenue fluctuates randomly

Which type of products tend to be price inelastic?

• Necessary products like milk

• Luxury products like jewelry

• Technological products like smartphones

• Seasonal products like holiday decorations

What effect does the ability to switch to similar or competitor products have on price elasticity?

• It makes demand more elastic

• It makes demand more inelastic

• It has no effect on price elasticity

• It makes demand perfectly inelastic