Law of Demand and Elasticity Quiz
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Questions and Answers

What does the law of demand state?

  • The price remains constant regardless of quantity
  • There is a direct relationship between price and quantity
  • The quantity demanded is not affected by price changes
  • There is an indirect relationship between price and quantity (correct)

    • Inelastic demand occurs when products:

  • Are luxuries
  • Have very few substitutes (correct)
  • Have many substitutes available
  • Experience a large change in quantity with a small change in price

    • What happens to total revenue when demand is inelastic and the price increases?

  • Total revenue increases (correct)
  • Total revenue fluctuates randomly
  • Total revenue remains constant
  • Total revenue decreases

    • What does an elasticity coefficient greater than one (>1) indicate?

    <p>A large change in quantity for a small change in price</p> Signup and view all the answers

    Why do gas stations typically not have sales according to the text?

    <p>Lowering prices would decrease total revenue</p> Signup and view all the answers

    How is the concept of elasticity related to the size of the box mentioned in the text?

    <p>The box gets smaller with elastic demand and bigger with inelastic demand</p> Signup and view all the answers

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