Elasticities of Demand and Supply

What is the definition of price elasticity of demand?

• A measure of the responsiveness of quantity supplied to a change in price.

• The average price of a product over a given time period.

• A measure of the responsiveness of quantity demanded to a change in price.

• The total amount of money spent on a product.

What are the determinants of price elasticity of demand?

• availability of substitutes, necessity or luxury, proportion of income spent, time period, and definition of the market

• weather conditions, political stability, exchange rates, and consumer expectations

• cost of production, level of competition, consumer demographics, and technological advancements

• price of the product, consumer income, consumer tastes and preferences, advertising and promotion, and government regulations

How is price elasticity of demand calculated?

• Total revenue divided by quantity demanded

• Percentage change in quantity demanded multiplied by percentage change in price

• Percentage change in quantity demanded divided by percentage change in price

• Percentage change in price divided by percentage change in quantity demanded

What does a price elasticity of demand greater than 1 indicate?

• Perfectly elastic demand

• Unitary demand

• Inelastic demand

• Elastic demand

What does a price elasticity of demand less than 1 indicate?

• perfectly elastic

• inelastic

• unitary

• elastic

What is the definition of income elasticity of demand?

• Income elasticity of demand is the responsiveness of the quantity demanded of a good or service to a change in price.

• Income elasticity of demand is the measure of how much a consumer's income changes when the price of a good or service changes.

• Income elasticity of demand is the responsiveness of the quantity demanded of a good or service to a change in income.

• Income elasticity of demand is the measure of how much a consumer's demand for a good or service changes when their income changes.

How is income elasticity of demand calculated?

• By dividing the percentage change in quantity demanded by the percentage change in income.

• By subtracting the percentage change in quantity demanded from the percentage change in income.

• By multiplying the percentage change in quantity demanded by the percentage change in income.

• By dividing the percentage change in income by the percentage change in quantity demanded.

What does a positive income elasticity of demand indicate?

• As income decreases, quantity demanded increases.

• As income increases, quantity demanded increases.

• As income increases, quantity demanded decreases.

• There is no relationship between income and quantity demanded.

What does a negative income elasticity of demand indicate?

• As income increases, quantity demanded increases.

• As income decreases, quantity demanded decreases.

• As income increases, quantity demanded decreases.

• Income has no effect on quantity demanded.

What is the definition of cross-price elasticity of demand?

• Responsiveness of quantity supplied of one good to a change in the price of another good.

• The measure of how much the quantity demanded of one good changes in response to a change in the price of another good.

• The measure of how much the quantity supplied of one good changes in response to a change in the price of another good.

• Responsiveness of quantity demanded of one good to a change in the price of another good.