Elasticity of Demand Quiz

What does it mean if a product has a PED of -2?

• Demand is perfectly inelastic

• Demand is price elastic

• Demand is price inelastic

• Demand is perfectly elastic

Which of the following factors is most likely to make demand more elastic?

• The product is a necessity

• There are many substitutes available

• The product is addictive

• It has a strong brand loyalty

If the price of a product increases by 10% and demand falls by 5%, the demand is:

• Elastic

• Inelastic

• Unitary elastic

• Perfectly elastic

Which formula is correct for calculating PED?

• % change in quantity demanded ÷ % change in income

• % change in price ÷ % change in quantity demanded

• % change in quantity demanded ÷ % change in price

• % change in supply ÷ % change in price

If a firm knows its product has elastic demand, what is the best pricing strategy to increase revenue?

• Increase price

• Decrease price

• Keep price unchanged

• Increase production costs

A PED value of 0 indicates:

• Perfectly elastic demand

• Unitary elastic demand

• Perfectly inelastic demand

• Price inelastic demand

A YED of +2 suggests that the good is:

• An inferior good

• A necessity

• A normal good

• A luxury good

If the income of consumers rises by 5% and demand for a good falls by 3%, this good is:

• A luxury good

• A normal good

• An inferior good

• A necessity

Which formula is used to calculate YED?

• % change in quantity demanded ÷ % change in price

• % change in income ÷ % change in quantity demanded

• % change in quantity demanded ÷ % change in income

• % change in supply ÷ % change in income

Which of the following goods is most likely to have a negative YED?

• Organic food

• Public transport

• Designer handbags

• Foreign holidays