Quiz on Price Elasticity of Demand

What does price elasticity of demand (PED) measure?

• The relationship between income and demand

• The responsiveness of demand to a change in price

• The relationship between supply and demand

• The effect of advertising on demand

If a product has a PED of -0.5, it is considered:

• Price elastic

• Price inelastic

• Perfectly elastic

• Unitary elastic

Which of the following goods is most likely to have inelastic demand?

• A luxury holiday

• Petrol

• Designer clothing

• Cinema tickets

What is the PED for a product with perfectly elastic demand?

• 0

• -1

• Infinity

• -0.5

If a firm lowers the price of a product and total revenue increases, the demand for the product is likely to be:

• Elastic

• Inelastic

• Unitary elastic

• Perfectly inelastic

Which of the following factors affects PED?

• Number of substitutes available

• The cost of production

• The level of supply

• Government intervention

If a product is a necessity, its PED is likely to be:

• Elastic

• Inelastic

• Unitary elastic

• Perfectly elastic

What happens to total revenue when the price of a product with inelastic demand is increased?

• Total revenue increases

• Total revenue decreases

• Total revenue remains constant

• Total revenue fluctuates

If the PED of a product is -1, what does this mean?

• Demand is perfectly elastic

• Demand is perfectly inelastic

• Demand is unitary elastic

• Demand is relatively elastic

Which of the following goods is most likely to have elastic demand?

• A basic food item such as bread

• A luxury item like a sports car

• A life-saving medication

• Electricity