Price Elasticity of Demand Quiz
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Questions and Answers

What does a price elasticity of demand of 0 indicate?

  • Quantity demanded does not change with price (correct)
  • Quantity demanded changes infinitely with price
  • Quantity demanded changes proportionally with price
  • Quantity demanded changes by a fixed percentage with price

    • How is price elasticity of demand represented when demand is price elastic?

  • 0.5
  • Negative value
  • 1
  • Infinity (correct)

    • What does it mean when the price elasticity of demand is ∞?

  • Demand is perfectly inelastic
  • Demand is perfectly elastic
  • Quantity demanded does not change with price
  • A change in price leads to an infinite change in quantity demanded (correct)

    • When demand is price inelastic, what does a price elasticity of demand of 0 indicate?

    <p>Quantity demanded does not change with price</p> Signup and view all the answers

    What does it mean when the price elasticity of demand is ∞?

    <p>A change in price leads to infinite change in quantity demanded</p> Signup and view all the answers

    In the context of price elasticity of demand, what does 'unit elastic' mean?

    <p>A percentage change in price leads to the same percentage change in quantity demanded</p> Signup and view all the answers

    What does total revenue represent in the context of price elasticity of demand?

    <p>Earnings generated from selling a product</p> Signup and view all the answers

    How is price elasticity of demand calculated when demand is price elastic?

    <p>As a percentage change in quantity demanded divided by a percentage change in price</p> Signup and view all the answers

    Study Notes

    Price Elasticity of Demand

    • A price elasticity of demand of 0 indicates that demand is perfectly inelastic, meaning that changes in price do not affect the quantity demanded.

    Interpreting Price Elasticity

    • When demand is price elastic, the price elasticity of demand is greater than 1, meaning that a small percentage change in price will lead to a larger percentage change in quantity demanded.
    • A price elasticity of demand of ∞ indicates that demand is perfectly elastic, meaning that even the smallest change in price will lead to an infinite change in quantity demanded.

    Inelastic Demand

    • When demand is price inelastic, a price elasticity of demand of 0 indicates that demand is perfectly inelastic, meaning that changes in price do not affect the quantity demanded.

    Elasticity Terms

    • 'Unit elastic' means that the price elasticity of demand is equal to 1, meaning that a percentage change in price will lead to an equal percentage change in quantity demanded.
    • Total revenue represents the total amount of money received by a firm from the sale of its product, and is used to analyze the impact of price changes on revenue in the context of price elasticity of demand.

    Calculating Price Elasticity

    • When demand is price elastic, the price elasticity of demand can be calculated using the formula: price elasticity of demand = (percentage change in quantity demanded) / (percentage change in price).

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    Description

    Test your knowledge of price elasticity of demand with this quiz. Learn about price inelastic and price elastic demand, and understand how changes in price affect quantity demanded.

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