Elasticity Concepts Quiz

What does the price elasticity of demand (PED) measure?

• Responsiveness of quantity supplied to price changes

• Responsiveness of quantity demanded to price changes

• Responsiveness of income to price changes

• Responsiveness of supply to demand changes

If the price elasticity of demand is -2, how is the demand characterized?

• Perfectly inelastic

• Unitary elastic

• Price inelastic

• Price elastic

What is the formula for calculating price elasticity of demand (PED)?

• PED = Change in price / Change in quantity demanded

• PED = Percentage change in quantity demanded / Percentage change in price

• PED = Change in quantity supplied / Change in price

• PED = Percentage change in price / Percentage change in quantity demanded

When demand is price elastic, what happens to total revenue when price decreases?

• Total revenue increases

• Total revenue decreases

• Total revenue fluctuates

• Total revenue remains the same

Which of the following factors does NOT affect the price elasticity of demand?

• Time period

• Availability of substitutes

• Consumer preferences

• Proportion of income spent on the good

What is the characteristic of perfectly inelastic demand?

• Quantity demanded changes significantly with price changes

• Quantity demanded remains constant regardless of price changes

• Quantity demanded increases with price increases

• Quantity demanded decreases with price increases

If a good has many close substitutes, how is its demand likely to be characterized?

• Price inelastic

• Perfectly inelastic

• Price elastic

• Unitary elastic

What is the impact of a subsidy on the supply curve?

• It shifts the supply curve rightward

• It has no effect on the supply curve

• It shifts the supply curve leftward

• It makes the supply curve vertical

What is the effect of an indirect tax on the equilibrium price?

• It decreases the equilibrium price

• It increases the equilibrium price

• It has no effect on the equilibrium price

• It makes the equilibrium price unstable

When demand is price inelastic, what happens to total revenue when price increases?

• Total revenue fluctuates

• Total revenue increases

• Total revenue decreases

• Total revenue remains the same