Elasticity of Demand Quiz

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Questions and Answers

What does cross elasticity of demand measure?

The total expenditure on a good or service
The responsiveness of quantity demanded to a price change of another good (correct)
The change in the quantity demanded due to increased income levels
The effect of advertising on consumer behavior

Why does the availability of substitutes affect the elasticity of demand?

Consumers become less aware of price changes for substitutes
Consumers prefer to purchase from the same brand
Substitutes increase the necessity of products
Consumers can easily switch to alternatives if prices rise (correct)

How does time influence the elasticity of demand?

Longer time periods allow consumers to adjust their purchasing patterns (correct)
Longer time periods make demand less elastic
Time has no significant impact on demand elasticity
Short time periods increase consumer resistance to change

What is the relationship between income level and the elasticity of demand?

<p>Higher income levels increase the likelihood of switching to substitutes (D)</p> Signup and view all the answers

What occurs when a good is classified as a necessity in terms of demand elasticity?

<p>Its demand becomes less elastic and consumers continue purchasing despite price increases (C)</p> Signup and view all the answers

Flashcards

Cross Elasticity of Demand

Responsiveness of demand for one good to price changes of another good. Percentage change in quantity demanded of one good divided by the percentage change in the price of another good.

Advertising Elasticity of Demand

Responsiveness of demand for a good to changes in advertising spending. Calculated as percentage change in quantity demanded divided by the percentage change in advertising expenditure.