Elasticity of Demand Quiz

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What characterizes elastic demand?

Price changes result in equivalent changes in demand.

A small change in price leads to a large change in quantity demanded. (correct)

Demand remains constant regardless of price.

Demand is unaffected by price changes.

How is price elasticity calculated?

Price Elasticity = % Change in Quantity Demanded / % Change in Price (correct)

Price Elasticity = % Change in Quantity / Absolute Change in Price

Price Elasticity = % Change in Price / % Change in Quantity Demanded

Price Elasticity = Absolute Change in Price / % Change in Demand

What does a price elasticity greater than 1 indicate?

Unit elastic demand

Inelastic demand

Elastic demand (correct)

No demand change

What would indicate inelastic demand?

A significant price change results in a smaller change in quantity demanded. Signup and view all the answers

If a good has unit elastic demand, what occurs when the price changes?

The quantity demanded changes proportionally to the price change. Signup and view all the answers

What does price elasticity of demand measure?

Responsiveness of quantity demanded to changes in the price of the good Signup and view all the answers

Which formula represents the calculation of price elasticity of demand?

$E_d = rac{ ext{% Change in Quantity Demanded}}{ ext{% Change in Price}}$ Signup and view all the answers

What type of elasticity measures the responsiveness of quantity demanded to changes in income?

Income elasticity of demand Signup and view all the answers

Cross elasticity of demand focuses on which aspect of demand?

Changes in the prices of other goods Signup and view all the answers

What does a high price elasticity of demand indicate?

Quantity demanded is highly responsive to price changes Signup and view all the answers

What characterizes perfectly inelastic demand?

Quantity demanded remains constant regardless of price changes. Signup and view all the answers

What is the elasticity of demand in the case of relatively elastic demand?

A price change leads to a proportionally larger change in quantity demanded. Signup and view all the answers

Which demand type corresponds with a steep downward sloping line on a graph?

Relatively inelastic demand. Signup and view all the answers

In the case of perfectly elastic demand, what happens to quantity demanded if the price changes?

Quantity demanded can drop to zero or increase dramatically. Signup and view all the answers

How does relatively inelastic demand react to a change in price?

Quantity demanded changes proportionally less than price. Signup and view all the answers

What does price elasticity of supply measure?

The responsiveness of quantity supplied to price changes Signup and view all the answers

What characterizes inelastic supply?

Elasticity is less than 1 Signup and view all the answers

If the price elasticity of supply is exactly 1, how is the supply described?

Unitary elasticity Signup and view all the answers

Which of the following describes perfectly elastic supply?

Elasticity is infinite Signup and view all the answers

In a supply curve illustrating inelastic supply, how is the curve expected to appear?

Steep and rising Signup and view all the answers

What is the formula used to calculate the price elasticity of demand in the examples provided?

$rac{P_{ ext{new}} - P_{ ext{old}}}{P_{ ext{old}}} imes rac{Q_{ ext{new}}}{Q_{ ext{old}}}$ Signup and view all the answers

What is the primary purpose of calculating price elasticity of demand?

To understand how quantity demanded changes with price changes Signup and view all the answers

Based on the data provided, what happens to quantity demanded when the price decreases from $10 to $8?

It increases Signup and view all the answers

What can be inferred about the demand if the calculated price elasticity of demand is greater than 1?

Demand is elastic Signup and view all the answers

How does a decrease in the commodity price affect consumer demand in this context?

Consumer demand will likely increase Signup and view all the answers

What is the definition of price elasticity of supply?

A measure of how responsive quantity supplied is to a change in price. Signup and view all the answers

Which of the following categories describes a situation where quantity supplied does not change with a change in price?

Perfectly Inelastic Supply Signup and view all the answers

How is unitary elastic supply defined?

Percentage change in quantity supplied equals the percentage change in price. Signup and view all the answers

What degree of elasticity characterizes relatively inelastic supply?

Less than 1 Signup and view all the answers

Which factor tends to increase the elasticity of supply over time?

Time period Signup and view all the answers

Which type of supply is characterized by a drastic change in quantity supplied with a small change in price?

Perfectly Elastic Supply Signup and view all the answers

What is the condition of relatively elastic supply?

Quantity supplied changes more than proportionally to a change in price. Signup and view all the answers

In which situation would supply be classified as perfectly inelastic?

When the quantity supplied remains constant despite price changes. Signup and view all the answers