G8 Econs - Price Elasticity of Demand

What is price elasticity of demand?

• A measure of the extent to which price changes when the quantity demanded changes

• A measure of the extent to which the quantity demanded changes when price changes

• A measure of the extent to which total revenue changes when price changes

• A measure of the extent to which price changes when total revenue changes

Demand for a product is inelastic. What effect will a fall in price have?

• A) Demand will not change

• B) Demand will change by a greater percentage

• C) Total revenue will fall

• D) Total revenue will rise

What characteristic is likely to make the demand for a product elastic?

• It is a necessity

• It is habit-forming

• It is relatively cheap

• It has close substitutes

• Perfectly inelastic

• Inelastic

• Unity

• Elastic

What does a PED figure of -2 indicate?

• Elastic demand (since the absolute value is greater than 1)

• Inelastic demand (since the absolute value is less than 1)

• Unitary elastic demand (since the absolute value is equal to 1)

• Perfectly inelastic demand (PED = 0)

If the demand for a product is elastic, what happens to total revenue when the price decreases?

• Total revenue decreases

• Total revenue remains unchanged

• Total revenue increases

• Total revenue becomes zero

Which of the following factors would likely make demand more elastic?

• The product is a necessity

• The product has many close substitutes

• The product is habit-forming

• The product is addictive

If the quantity demanded of a product increases significantly when the price decreases slightly, what does this suggest about the demand?

• It is inelastic

• It is elastic

• It is unit elastic

• It is perfectly inelastic

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

• A) Time period considered

• B) Cost of production

What type of demand is likely for luxury goods?

• Inelastic

• Elastic

• Perfectly inelastic

• Perfectly elastic