Define elasticity in the context of economics.

• Elasticity is the fixed cost of production.

• Elasticity in economics refers to the responsiveness of quantity demanded or supplied to changes in price or other factors.

• Elasticity measures the total revenue of a firm.

• Elasticity refers to the total amount of goods produced.

What is the formula for calculating price elasticity of demand?

• Price Elasticity of Demand = (Total Revenue Change) / (Quantity Change)

• Price Elasticity of Demand = (Price Change) / (Quantity Change)

• Price Elasticity of Demand = (Change in Price) / (Change in Quantity Demanded)

• Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)

If the price of a product increases by 10% and the quantity demanded decreases by 5%, what is the price elasticity of demand?

• 1.0

• 0.5

• 0.2

• 0.8

Explain the difference between elastic and inelastic demand.

• Inelastic demand increases with price changes.

• Elastic demand is always higher than inelastic demand.

• Elastic demand is sensitive to price changes, while inelastic demand is not.

• Elastic demand refers to goods that are necessities.

What does it mean if the price elasticity of demand is equal to 1?

• Elastic demand.

• Inelastic demand.

• Unitary elasticity of demand.

• Perfectly elastic demand.

Calculate the income elasticity of demand if the quantity demanded increases from 100 to 120 when income increases from $1000 to $1200.

• 1

• 2

• 0.5

• 3.5

What factors can affect the elasticity of demand for a product?

• Factors affecting elasticity of demand include availability of substitutes, income proportion, necessity vs luxury, time period, and consumer preferences.

• Brand loyalty of consumers

• Advertising budget of the company

• Seasonal trends in sales

How does the concept of elasticity apply to supply?

• The concept of elasticity in supply indicates how quantity supplied responds to price changes.

• Elasticity in supply measures the total production capacity of a firm.

• Elasticity refers to the fixed quantity supplied regardless of price changes.

• The concept of elasticity in supply is unrelated to market demand.

If the price elasticity of supply is greater than 1, what does that indicate about the supply of the product?

• The supply of the product is perfectly inelastic.

• The supply of the product is unitary elastic.

• The supply of the product is inelastic.

• The supply of the product is elastic.

Provide an example of a product with elastic demand and explain why it is considered elastic.

• Luxury cars

• Public transportation services

• Basic household items

• Essential groceries