IE 4 - Markets in Action II

What does price elasticity of demand measure?

• The responsiveness of demand to changes in price

• The relationship between supply and demand

• How much producers are willing to supply at different prices

• The impact of government intervention on markets

When demand is perfectly inelastic, the demand curve is:

• Downward sloping

• Vertical

• Horizontal

• Upward sloping

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

• Luxury watches

• Electricity

• Designer handbags

• Movie tickets

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

• 0.5

• 1.0

• 1.5

• 2.0

A product with many close substitutes is likely to have:

• Elastic demand

• Inelastic demand

• Perfectly inelastic demand

• Unitary elasticity

Which of the following is a determinant of price elasticity of demand?

• Availability of substitutes

• The cost of production

• Government regulations

• The equilibrium price

If the price elasticity of demand is greater than 1, the demand is considered:

• Perfectly inelastic

• Inelastic

• Elastic

• Unitary elastic

If a product's demand is inelastic, how will an increase in price affect total revenue?

• Total revenue will increase

• Total revenue will decrease

• Total revenue will stay the same

• Total revenue will drop to zero

For which type of good is demand likely to be most elastic?

• Salt

• Luxury cars

• Insulin

• Tap water

When the price of a product increases by 15% and quantity demanded decreases by 15%, the demand is:

• Elastic

• Inelastic

• Perfectly elastic

• Unitary elastic