3.1.2.2 PED NOTES

What is the formula to calculate the price elasticity of demand?

If the price elasticity of demand for a product is greater than 1, how is the demand described?

• Inelastic

• Unit elastic

• Perfectly elastic

• Elastic

How does an increase in price affect total revenue when demand is elastic?

• Total revenue increases

• Total revenue decreases

• Total revenue remains unchanged

• Total revenue initially increases, then decreases

Which of the following factors does NOT influence the price elasticity of demand?

• Availability of close substitutes

• Proportion of income spent on the good

• Brand loyalty

• Government regulation

What happens to a firm's total revenue when the price of a product is decreased and the demand is inelastic?

• Total revenue increases

• Total revenue decreases

• Total revenue remains unchanged

• There is no predictable change in total revenue

What is the price elasticity of demand if a 10% increase in price leads to a 5% decrease in quantity demanded?

• 0.5

• 2

• -0.5

• -2

Which of the following is a characteristic of a good with perfectly inelastic demand?

• Quantity demanded changes significantly with a small change in price

• Quantity demanded does not change with a change in price

• Quantity demanded changes proportionally with price

• Quantity demanded increases as price increases

What type of elasticity is present if the elasticity coefficient is exactly 1?

• Inelastic

• Elastic

• Unit elastic

• Perfectly elastic

Which factor is likely to make the demand for a good more elastic?

• The good is a necessity

• Few close substitutes are available

• The good represents a small portion of the consumer's budget

• The market definition is broad

What does a price elasticity of demand equal to zero mean?

• Demand is unit elastic

• Demand is perfectly elastic

• Demand is perfectly inelastic

• Demand is elastic