Micro Elasticity Quiz

If the price elasticity of demand for a product is less than 1, the demand for the product is considered to be:

• Perfectly elastic

• Unit elastic

• Elastic

• Inelastic

The price elasticity of demand is calculated as the:

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

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

• Change in quantity demanded divided by the change in price

• Change in price divided by the change in quantity demanded

If a 5% increase in the price of a good leads to a 15% decrease in the quantity demanded, the price elasticity of demand for this good is:

• 0.33

• 1

• 3

• -3

Which of the following goods is likely to have the most inelastic demand?

• A specific brand of bottled water

• Salt

• Luxury cars

• Airline tickets for holiday travel

The cross-price elasticity of demand measures:

• The responsiveness of the quantity demanded of one good to a change in the price of the same good

• The responsiveness of the quantity demanded of one good to a change in the price of another good

• The responsiveness of the price of one good to a change in the quantity demanded of another good

• The responsiveness of the price of one good to a change in the price of another good

If the cross-price elasticity of demand between two goods is positive, the two goods are considered to be:

• Complements

• Substitutes

• Normal goods

• Inferior goods

Income elasticity of demand measures:

• The responsiveness of demand to a change in the price of the good

• The responsiveness of demand to a change in consumers' income

• The change in price that results from a change in demand

• The change in consumers' income that results from a change in demand

If the income elasticity of demand for a good is negative, the good is considered to be a(n):

• Normal good

• Inferior good

• Substitute good

• Complementary good

A perfectly inelastic demand curve is represented by a line that is:

• Horizontal

• Vertical

• Upward sloping

• Downward sloping

If a firm knows that the demand for its product is elastic, to increase total revenue, it should:

• Increase the price

• Decrease the price

• Keep the price the same

• Increase the price and decrease the quantity supplied