Elasticity

What does price elasticity of demand measure?

• The change in supply due to price changes

• The responsiveness of quantity demanded to price changes

• The impact of advertising on demand

• The total revenue generated from sales

If demand is elastic and price increases, what happens to total revenue?

• Total revenue decreases

• Total revenue stays the same

• Total revenue increases

• No change in total revenue

Which formula represents the price elasticity of demand?

• % change in price / % change in quantity demanded

• % change in price / % change in quantity supplied

• % change in quantity demanded / % change in price

• Price × Quantity

If price elasticity of demand is -0.5, demand is considered?

• Inelastic

• Elastic

• Unit Elastic

• Perfectly inelastic

Which factor does NOT affect price elasticity of demand?

• Availability of substitutes

• Importance in household budgets

• Time period of analysis

• The brand image of the product

What happens to total revenue when demand is unit elastic?

• Total revenue increases

• Total revenue remains the same

• Total revenue falls

• Total revenue fluctuates

If income increases and demand for a good decreases, it is classified as?

• Normal good

• Inferior good

• Luxury good

• Complementary good

What does cross-price elasticity of demand measure?

• How quantity demanded of one good changes due to a price change in another

• How price changes affect overall demand

• The impact of income changes on demand

• The relationship between advertising and demand

If cross-price elasticity is positive, the two goods are?

• Complements

• Unrelated goods

• Substitutes

• Inferior

What does price elasticity of supply measure?

• The responsiveness of demand to price changes

• The relationship between supply and advertising

• How government policies affect supply

• The responsiveness of supply to price changes