Price Elasticity and Pricing Strategies Quiz

What does price elasticity of demand measure?

• The quantity supplied of a good

• The total revenue of a firm

• The quantity demanded of a good

• The cost of production

What is price discrimination?

• Setting prices based on production costs

• Offering discounts to loyal customers

• Charging different prices to different groups for the same product

• Charging the same price to all consumers

What is one advantage of using contribution per unit measure?

• It reduces production costs

• It guarantees maximum profit

• It eliminates competition

• It helps determine the price for special orders

What is a disadvantage of setting prices based on contribution per unit?

• It is too complex to calculate

• It may not be competitive in the market

• It always leads to higher prices

• It requires extensive market research

What does a price elasticity of demand (PED) of 0-1 indicate?

• Perfectly inelastic demand

• Inelastic demand

• Perfectly elastic demand

• Unit elastic demand

What does a PED of 1 signify?

• Unit elastic demand

• Elastic demand

• Inelastic demand

• Perfectly elastic demand

What characterizes elastic demand?

• Quantity demanded remains constant regardless of price

• Small changes in price lead to large changes in quantity demanded

• Large changes in price lead to small changes in quantity demanded

• Price changes have no effect on quantity demanded

Which of the following is an example of a product with inelastic demand?

• Bottled water

• Chocolate bars

• Insulin for diabetics

• Luxury cars

What is the formula for calculating price elasticity of demand?

• Fixed costs / Variable costs

• Total revenue / Total cost

• Percentage change in quantity demanded / Percentage change in price

• Percentage change in price / Percentage change in quantity demanded

What happens if the PED is zero?

• Demand is highly elastic

• Demand is unit elastic

• Demand is perfectly inelastic

• Demand is perfectly elastic