Quiz on Elasticity in Microeconomics

What does price elasticity of demand measure?

• The responsiveness of quantity demanded to a change in price

• The number of substitutes available

• The income level of consumers

• The total revenue from sales

If the price of a good increases and the quantity demanded decreases significantly, what type of demand is this?

• Inelastic demand

• Elastic demand

• Unit elastic demand

• Perfectly inelastic demand

What happens to total revenue when demand is elastic and price decreases?

• Total revenue decreases

• Total revenue remains unchanged

• Total revenue becomes zero

• Total revenue increases

What is the formula for calculating price elasticity of demand?

• Percentage change in price / Percentage change in quantity demanded

• Percentage change in quantity demanded / Percentage change in price

• Total revenue / Quantity sold

• Price / Quantity demanded

What does a cross elasticity of demand greater than zero indicate?

• The goods are normal

• The goods are inferior

• The goods are substitutes

• The goods are complements

If the income elasticity of demand is less than zero, what type of good is it?

• Substitute good

• Luxury good

• Inferior good

• Normal good

What is the effect of a price increase on total revenue when demand is inelastic?

• Total revenue becomes negative

• Total revenue decreases

• Total revenue remains unchanged

• Total revenue increases

Which factor does NOT influence the elasticity of demand?

• The time elapsed since a price change

• The proportion of income spent on the good

• The availability of substitutes

• The color of the product

What is the elasticity of supply in the short run?

• Perfectly inelastic

• Perfectly elastic

• Unit elastic

• Somewhat elastic

What does a perfectly elastic demand curve look like?

• Upward sloping line

• Vertical line

• Horizontal line

• Downward sloping line