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Elasticity and its Application in Economics Quiz

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Elasticity and its Application in Economics Quiz

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Questions and Answers

What is the price elasticity of demand a measure of?

Percentage change in quantity supplied
Responsiveness of quantity supplied to changes in price
Responsiveness of quantity demanded to changes in determinants (correct)
Percentage change in price

In what situation is demand considered elastic?

Market is narrowly defined
Quantity demanded responds substantially to changes in price (correct)
Quantity demanded responds only slightly to changes in price
Availability of close substitutes is low

What factor makes demand more elastic according to the text?

Availability of close substitutes (correct)
Wider market definition
Necessity of the good
Shorter time horizon

How does the time horizon affect the elasticity of demand?

Longer time horizon leads to more elastic demand (D) Signup and view all the answers

What characterizes inelastic demand?

Quantity demanded responds only slightly to changes in price (A) Signup and view all the answers

If the price elasticity of demand for a product is calculated to be 0.5, how will total revenue change when the price increases?

Total revenue will increase (A) Signup and view all the answers

What type of demand is characterized by a price elasticity of demand equal to 1?

Unit elastic demand (D) Signup and view all the answers

If the price elasticity of supply for a product is very high, how will total revenue be affected by an increase in price?

Total revenue will decrease (D) Signup and view all the answers

What will happen to total revenue when the price of a product with perfectly elastic demand increases?

Total revenue will remain constant (B) Signup and view all the answers

Considering the announcement of a new wheat hybrid increasing production by 20%, what type of elasticity is most relevant for farmers' reactions?

Price elasticity of supply (A) Signup and view all the answers