Economics Chapter on Elasticity of Demand
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Questions and Answers

What is the primary focus of the chapter according to the provided content?

  • Price Elasticity of Demand (correct)
  • Cross Elasticity of Demand
  • Total Expenditure Method
  • Income Elasticity of Demand

    • Which of the following best describes cross elasticity of demand?

  • Change in quantity demanded due to change in income
  • Change in quantity demanded due to change in the price of the same commodity
  • Change in quantity demanded due to change in consumer preferences
  • Change in quantity demanded due to change in the price of another commodity (correct)

    • What does a high price elasticity of demand indicate?

  • Demand significantly changes with price changes (correct)
  • Price changes do not affect total revenue
  • Demand is unresponsive to price changes
  • Consumer preference is wholly stable

    • According to the definition, what aspect does the price elasticity of demand measure?

    <p>Responsiveness of quantity demanded to changes in own price</p> Signup and view all the answers

    Which method is NOT mentioned as a technique for measuring price elasticity of demand?

    <p>Utilization Method</p> Signup and view all the answers

    What does elasticity of demand specifically measure in relation to quantity demanded?

    <p>The degree to which quantity demanded changes due to variation in its determinants</p> Signup and view all the answers

    Which of the following methods is NOT used to measure price elasticity of demand?

    <p>Consumer Preference Method</p> Signup and view all the answers

    If the price of a commodity increases by 30% and the quantity demanded decreases by 10%, what is the elasticity of demand?

    <p>0.33</p> Signup and view all the answers

    Which scenario illustrates inelastic demand?

    <p>A 20% price increase resulting in a 15% decrease in quantity demanded</p> Signup and view all the answers

    What is the relationship described by the law of demand?

    <p>Higher prices result in a decrease in quantity demanded</p> Signup and view all the answers

    In which situation does the elasticity of demand show greater than unitary elasticity?

    <p>A price decrease leads to an increase in total expenditure.</p> Signup and view all the answers

    What does a situation of less than unitary elasticity indicate?

    <p>Total expenditure decreases when the price decreases.</p> Signup and view all the answers

    What is the nature of the elasticity of demand in Situation A of Table 1?

    <p>Unitary elasticity.</p> Signup and view all the answers

    Which of the following statements is correct regarding price elasticity of demand?

    <p>An increase in price results in increased total expenditure for inelastic demand.</p> Signup and view all the answers

    Situations of greater than unitary elasticity imply which type of relationship between price and total expenditure?

    <p>A decrease in price results in an increase in total expenditure.</p> Signup and view all the answers

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