Understanding Elasticities in Economics

What does the price elasticity of demand measure?

• The responsiveness of quantity demanded to a change in price

• The responsiveness of quantity supplied to a change in price

• The responsiveness of demand to a change in consumer income

• The responsiveness of supply to a change in consumer income

If the price elasticity of demand for a product is greater than 1, the demand is considered to be:

• Inelastic

• Elastic

• Unitary elastic

• Perfectly inelastic

Eesha is running a small business selling handmade candles. She notices that when she slightly increases the price of her candles, the demand decreases significantly. Which of the following is a determinant of price elasticity of demand that Eesha should consider?

• The cost of production

• The availability of substitutes

• The level of technology

• The number of suppliers

The income elasticity of demand for a normal good is:

• Negative

• Zero

• Positive

• Greater than 1

If a 10% increase in income leads to a 5% increase in the quantity demanded of a good, the income elasticity of demand is:

• 0.5

• 1

• 1.5

• 2

Which of the following goods is likely to have a high price elasticity of demand?

• Salt

• Petrol

• Luxury cars

• Bread

If the price of a good increases and the total revenue remains unchanged, the demand for the good is:

• Elastic

• Inelastic

• Unitary elastic

• Perfectly elastic

Which of the following is NOT a determinant of elasticity of supply?

• Time period

• Availability of raw materials

• Consumer preferences

• Flexibility of production

The price elasticity of demand for a product is -0.8. If the price of the product increases by 10%, the quantity demanded will:

• Increase by 8%

• Decrease by 8%

• Increase by 0.8%

• Decrease by 0.8%

A perfectly inelastic demand curve is:

• Horizontal

• Vertical

• Downward sloping

• Upward sloping