Elasticity of Demand Quiz

What is the ratio of proportionate change in quantity demanded of a commodity to a given proportionate change in its price called?

Answer explanation

The ratio of proportionate change in quantity demanded to a proportionate change in price is known as the price elasticity of demand. It measures how sensitive the quantity demanded is to price changes.

What is the coefficient of elasticity of demand when the demand remains constant despite substantial changes in price?

• Zero

• Infinite

• Greater than one

• Less than one

Answer explanation

The coefficient of elasticity of demand is zero when demand remains constant despite price changes, indicating perfectly inelastic demand. Thus, the correct answer is zero.

What type of demand refers to a situation where a slight rise in price causes the quantity demanded to fall to zero?

• Perfectly elastic demand

• Perfectly inelastic demand

• Relatively elastic demand

• Unitary elastic demand

Answer explanation

Perfectly elastic demand means that any increase in price leads to the quantity demanded falling to zero, as consumers will switch to alternatives. This is why a slight price rise results in no demand.

What type of demand is characterized by a larger proportionate change in price resulting in a smaller proportionate change in quantity demanded?

• Perfectly elastic demand

• Relatively inelastic demand

• Perfectly inelastic demand

• Unitary elastic demand

Answer explanation

Relatively inelastic demand means that a change in price leads to a smaller change in quantity demanded. This is characterized by a larger proportionate change in price compared to the proportionate change in quantity demanded.

What is the coefficient of elasticity of demand when a given proportionate change in price is accompanied by an equally proportionate change in quantity demanded?

• Greater than one

• Less than one

• Zero

• One

Answer explanation

The coefficient of elasticity of demand measures the responsiveness of quantity demanded to price changes. When the changes are equal, the elasticity is exactly one, indicating unitary elasticity.

What type of demand is indicated when a change in price leads to a proportionate change in quantity demanded that is greater than one?

• Perfectly elastic demand

• Unitary elastic demand

• Relatively elastic demand

• Perfectly inelastic demand

Answer explanation

Relatively elastic demand occurs when a price change results in a proportionate change in quantity demanded that is greater than one, indicating consumers are responsive to price changes.

What is the coefficient of elasticity of demand when a small change in price results in a large change in quantity demanded?

• Zero

• Greater than one

• Less than one

• One

Answer explanation

The coefficient of elasticity of demand measures how responsive quantity demanded is to price changes. A large change in quantity demanded from a small price change indicates elasticity greater than one, meaning demand is elastic.

What type of demand is described when the quantity demanded remains unchanged regardless of price fluctuations?

• Unitary elastic demand

• Perfectly elastic demand

• Perfectly inelastic demand

• Relatively elastic demand

Answer explanation

Perfectly inelastic demand occurs when the quantity demanded does not change regardless of price changes. This means consumers will buy the same amount no matter the price, making it the correct choice.

What type of demand is observed when a change in price leads to no change in the quantity demanded?

• Perfectly inelastic demand

• Relatively elastic demand

• Perfectly elastic demand

• Unitary elastic demand

Answer explanation

Perfectly inelastic demand occurs when a change in price does not affect the quantity demanded at all. This means consumers will buy the same amount regardless of price changes, making it the correct choice.

What is the elasticity of demand when a significant change in price results in a minimal change in quantity demanded?

• One

• Greater than one

• Zero

• Less than one

Answer explanation

The elasticity of demand is less than one when a significant price change leads to a minimal change in quantity demanded, indicating inelastic demand. This means consumers are not very responsive to price changes.