Price Elasticity of Demand Quiz

Which of the following is NOT a determinant of price elasticity of demand?

• A) Availability of substitutes

• B) Necessity vs. luxury

• C) Government taxation policies

• D) Time horizon

When a product has many close substitutes, its price elasticity of demand is likely to be:

• A) More elastic

• B) More inelastic

• C) Unaffected

• D) Zero

The demand for luxury goods tends to be:

• A) Perfectly inelastic

• B) Relatively elastic

• C) Unitary elastic

• D) Relatively inelastic

If a product is a necessity rather than a luxury, its price elasticity of demand is likely to be:

• A) More elastic

• B) Unitary elastic

• C) More inelastic

• D) Perfectly elastic

How does the proportion of income spent on a good affect its price elasticity of demand?

• A) The smaller the proportion, the more elastic demand is

• B) The larger the proportion, the more elastic demand is

• C) There is no effect

• D) Demand becomes perfectly inelastic

The demand for a product is likely to be more elastic in the long run because:

• A) Consumers have more time to find substitutes

• B) Income levels decrease over time

• C) Prices become lower over time

• D) Governments set price ceilings

Which type of good typically has inelastic demand?

• A) Soft drinks

• B) Luxury cars

• C) Insulin for diabetics

• D) Designer handbags

If a product is addictive or habit-forming, its price elasticity of demand is likely to be:

• A) Elastic

• B) Inelastic

• C) Perfectly elastic

• D) Unitary elastic

If a store increases the price of a product and total revenue decreases, the demand for that product is:

• A) Elastic

• B) Inelastic

• C) Unitary elastic

• D) Perfectly inelastic

Why do goods with few or no substitutes tend to have inelastic demand?

• A) Consumers can easily switch to alternatives

• B) Consumers have no choice but to continue purchasing the good

• C) The proportion of income spent is always small

• D) The price of the good never changes