Quiz on Elasticity in Microeconomics

What does price elasticity of demand measure?

• The responsiveness of quantity demanded to a change in price

• The total revenue from the sale of a good

• The responsiveness of supply to a change in price

• The relationship between income and quantity demanded

If the price of a good increases and the quantity demanded decreases significantly, what type of demand is this?

• Inelastic demand

• Perfectly inelastic demand

• Unit elastic demand

• Elastic demand

What happens to total revenue when demand is elastic and price decreases?

• Total revenue becomes zero

• Total revenue remains unchanged

• Total revenue increases

• Total revenue decreases

What is the formula for calculating price elasticity of demand?

• Percentage change in price / Percentage change in quantity demanded

• Percentage change in quantity demanded / Percentage change in price

• Total revenue / Quantity sold

• Quantity demanded / Price

What does a cross elasticity of demand greater than zero indicate?

• The goods are inferior

• The goods are substitutes

• The goods are complements

• The goods are normal

What is the effect of a price increase on total revenue when demand is inelastic?

• Total revenue decreases

• Total revenue increases

• Total revenue remains unchanged

• Total revenue becomes negative

What does income elasticity of demand measure?

• The responsiveness of quantity demanded to a change in price

• The responsiveness of quantity demanded to a change in income

• The relationship between price and total revenue

• The responsiveness of supply to a change in income

If a good has a price elasticity of demand equal to 1, it is considered:

• Inelastic

• Perfectly inelastic

• Perfectly elastic

• Unit elastic

What is the primary determinant of cross elasticity of demand?

• The closeness of substitutes or complements

• The proportion of income spent on the good

• The total revenue generated from sales

• The time elapsed since a price change

What type of demand occurs when quantity demanded does not change with price changes?

• Inelastic demand

• Perfectly inelastic demand

• Elastic demand

• Unit elastic demand