Price Elasticity of Demand Quiz

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of:

• a. a 0.2 percent increase in the price.

• b. a 2.5 percent increase in the price.

• c. a 5 percent increase in the price.

• d. a 20 percent increase in the price.

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of:

• a. a 0.06 percent decrease in the price.

• b. a 1.5 percent decrease in the price.

• c. a 9.6 percent decrease in the price.

• d. a 15 percent decrease in the price.

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of:

• a. a 0.1 percent decrease in the price.

• b. a 1 percent decrease in the price.

• c. a 10 percent decrease in the price.

• d. a 19.6 percent decrease in the price.

According to the midpoint method, if the price elasticity of demand for smoking is 0.9 and the government policy changed the price of cigarettes, the reduction in smoking should be:

• 30%

• 40%

• 80%

• 250%

Studies indicate that the price elasticity of demand for beer is about 0.9. If a government policy changed the price of a case of beer from $10 to $20, the reduction in beer consumption according to the midpoint method should be:

• 30%

• 40%

• 60%

• 74%

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the:

• steeper the demand curve will be.

• flatter the demand curve will be.

• further to the right the demand curve will sit.

• closer to the vertical axis the demand curve will sit.

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the:

• steeper the demand curve will be.

• flatter the demand curve will be.

• further to the right the demand curve will sit.

• closer to the vertical axis the demand curve will sit.

The flatter the demand curve through a given point, the:

• greater the price elasticity of demand at that point.

• smaller the price elasticity of demand at that point.

• closer the price elasticity of demand will be to the slope of the curve.

• greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve.

The smaller the price elasticity of demand, the:

• steeper the demand curve will be through a given point.

• flatter the demand curve will be through a given point.

• more strongly buyers respond to a change in price between any two prices P1 and P2.

• smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.

As we move downward and to the right along a linear, downward-sloping demand curve, which of the following is true?

• Both slope and elasticity remain constant.

• Slope changes but elasticity remains constant.

• Both slope and elasticity change.

• Slope remains constant but elasticity changes.