Price Elasticity of Demand Factors and Business Implications Quiz

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

A product with inelastic demand is more likely to experience a significant increase in revenue when prices are raised.

Marketing strategies should not consider factors like availability of substitutes and time horizon.

Income elasticity of demand measures the responsiveness of quantity demanded to changes in income.

Normal goods have negative income elasticity of demand.

Inferior goods experience a decrease in quantity demanded when income rises.

Elasticity in economics refers to the responsiveness of one economic variable to a change in another.

Price Elasticity of Demand measures the responsiveness of the quantity demanded of a good or service to changes in its price.

Elastic demand occurs when the percentage change in quantity demanded is less than the percentage change in price.

Inelastic demand happens when the percentage change in quantity demanded is greater than the percentage change in price.

Unit elastic demand exists when the percentage change in quantity demanded is equal to the percentage change in price.

Income Elasticity of Demand measures how the quantity demanded of a good or service changes in response to a change in income.

Luxury goods have an income elasticity of demand greater than 1.

Income elasticity of demand accurately predicts consumer behavior in all cases.

Substitutes have a positive cross-price elasticity of demand.

Complements have a negative cross-price elasticity of demand.

Price elasticity of demand measures the responsiveness of quantity demanded to changes in income.

Income elasticity of demand can impact business strategies such as pricing, product development, and marketing.