Price Elasticity of Demand Quiz

What determines the price of a product in a free market?

• Government regulations only

• Supply and demand

• Consumer preferences only

• Production costs only

When price elasticity of demand coefficient is 0.5, this means:

• The product is highly elastic

• The product is price inelastic

• The demand will increase by 50%

• The supply will decrease by 50%

Which of the following best describes the relationship between price and demand?

• As price increases, demand always stays constant

• As price increases, demand usually increases

• As price decreases, demand usually increases

• Price and demand have no relationship

A product with many close substitutes is likely to be:

• Price elastic

• Price inelastic

• Perfectly stable

• Price neutral

What happens to revenue when price increases for a price inelastic product?

• Revenue stays the same

• Revenue increases

• Revenue decreases

• Revenue becomes zero

Which factor does NOT affect price elasticity of demand?

• The product's necessity

• Income proportion spent

• The color of the product

• Availability of substitutes

If a product has strong brand loyalty, it tends to be:

• Price elastic

• Price inelastic

• Perfectly elastic

• Neutral elastic

When calculating price elasticity, what formula is used?

• Price change divided by quantity change

• Quantity change divided by price change

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

• Price multiplied by quantity

Which type of product typically has inelastic demand?

• Luxury items

• Basic necessities

• Entertainment products

• Fashion items

What happens to the quantity demanded when price decreases for an elastic product?

• Small decrease in quantity

• No change in quantity

• Large increase in quantity

• Quantity becomes zero