Price Elasticity of Demand

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Which organization owns the trademarks CFA®, Chartered Financial Analyst®, AIMR-PPS®, and GIPS®?

  • CFA Program Curriculum
  • CFA Institute (correct)
  • CFA Charterholders
  • CFA Candidates

What does the copyright cover in the CFA Program Curriculum 2024?

  • Material written by the editor/s
  • Individual selections that first appeared elsewhere
  • Both material written by the editor/s and individual selections (correct)
  • None of the above

What is the purpose of the CFA Program Curriculum?

  • To provide accurate and authoritative information (correct)
  • To distribute copyrighted material
  • To obtain copyright permissions
  • To provide legal advice and professional services

What should be done if legal advice or other expert assistance is required?

<p>Seek the services of a competent professional (B)</p> Signup and view all the answers

Which of the following is a function of money?

<p>Storing value (B)</p> Signup and view all the answers

What is the study of production, distribution, and consumption called?

<p>Economics (A)</p> Signup and view all the answers

Which of the following is a topic in demand and supply analysis?

<p>Price elasticity (B)</p> Signup and view all the answers

What are the two broad areas of study in economics?

<p>Microeconomics and macroeconomics (B)</p> Signup and view all the answers

Which measure of sensitivity does not depend on units of measure?

<p>Price elasticity of demand (B)</p> Signup and view all the answers

What is the formula for own-price elasticity of demand?

<p>%Δ Qx​d​​ / %Δ P​ (A)</p> Signup and view all the answers

What does a price elasticity of demand of -0.2 mean?

<p>Demand is inelastic (D)</p> Signup and view all the answers

What is the measure of sensitivity of quantity demanded to a change in price?

<p>Own-price elasticity (D)</p> Signup and view all the answers

Which of the following is true about price elasticity of demand?

<p>Price elasticity of demand measures the responsiveness of quantity demanded to changes in price (C)</p> Signup and view all the answers

What is the relationship between total, variable, fixed, and marginal costs?

<p>Total cost equals variable cost plus fixed cost (A)</p> Signup and view all the answers

In a perfectly competitive market, what is the relationship between price and output?

<p>Price equals marginal cost (B)</p> Signup and view all the answers

What is the role of demographics in business cycles?

<p>Demographics can impact the economic cycle through changes in population size and age distribution (D)</p> Signup and view all the answers

According to the text, what is the slope of the demand curve?

<p>-0.156 (C)</p> Signup and view all the answers

According to the text, which variable is used to underscore the price of a good itself?

<p>Px (A)</p> Signup and view all the answers

According to the text, what does the inverse demand function represent?

<p>The highest price willingly paid for each quantity (B)</p> Signup and view all the answers

According to the text, what is the dependent variable in the demand function?

<p>Qx (B)</p> Signup and view all the answers

Which of the following is true about the theory of the consumer?

<p>It focuses on consumption by utility-maximizing individuals. (D)</p> Signup and view all the answers

What does the law of demand state?

<p>As the price of a good falls, buyers will choose to buy less of it. (C)</p> Signup and view all the answers

What is the demand function?

<p>A relationship between the quantity demanded of a good and its own price, consumers' income, and the price of another good. (C)</p> Signup and view all the answers

What does a negative sign on the coefficient of gasoline price in the demand function indicate?

<p>As the price of gasoline goes up, fewer will likely be purchased and consumed. (A)</p> Signup and view all the answers

Which of the following statements is true about own-price elasticity of demand?

<p>When the magnitude is less than one, demand is said to be inelastic (B)</p> Signup and view all the answers

If the elasticity coefficient is equal to negative one, what is the demand called?

<p>Unit elastic (C)</p> Signup and view all the answers

Why is the own-price elasticity of demand always negative?

<p>Because a rise in price is associated with a fall in quantity demanded (B)</p> Signup and view all the answers

At what price is the demand considered elastic, given the elasticity coefficient of -1.28?

<p>€5 per liter (B)</p> Signup and view all the answers

What term in Equation 6 of the text remains constant along the entire demand curve for a linear demand curve?

<p>∆Q/∆P (A)</p> Signup and view all the answers

According to Exhibit 2, where is demand considered inelastic for a negatively sloped linear demand curve?

<p>Below the midpoint (C)</p> Signup and view all the answers

Which of the following is a trademark owned by CFA Institute?

<p>CFA® (D)</p> Signup and view all the answers

What is the purpose of the CFA Program Curriculum?

<p>To provide accurate and authoritative information (D)</p> Signup and view all the answers

What is the measure of sensitivity of quantity demanded to a change in price?

<p>Own-price elasticity of demand (C)</p> Signup and view all the answers

Which organization owns the trademarks CFA®, Chartered Financial Analyst®, AIMR-PPS®, and GIPS®?

<p>CFA Institute (D)</p> Signup and view all the answers

According to the text, what are the two broad areas of study in economics?

<p>Microeconomics and macroeconomics (C)</p> Signup and view all the answers

What is the measure of sensitivity of quantity demanded to a change in price?

<p>Price elasticity of demand (A)</p> Signup and view all the answers

According to the text, what does the inverse demand function represent?

<p>The relationship between price and quantity demanded (D)</p> Signup and view all the answers

What does a negative sign on the coefficient of gasoline price in the demand function indicate?

<p>An inverse relationship between gasoline price and quantity demanded (C)</p> Signup and view all the answers

Which of the following is a topic covered in the Economics Learning Module 1?

<p>Analysis of Market Structures (D)</p> Signup and view all the answers

What is the relationship between price and output in a perfectly competitive market?

<p>Price and output are directly related (D)</p> Signup and view all the answers

What is the role of demographics in business cycles?

<p>Demographics influence the timing and severity of business cycles (C)</p> Signup and view all the answers

What does a negative sign on the coefficient of gasoline price in the demand function indicate?

<p>Gasoline price has a negative impact on demand (D)</p> Signup and view all the answers

According to the text, what is the slope of the demand curve?

<p>-1/6.39 (A)</p> Signup and view all the answers

What does a negative sign on the coefficient of gasoline price in the demand function indicate?

<p>An increase in gas price leads to a decrease in quantity demanded. (B)</p> Signup and view all the answers

What is the measure of sensitivity of quantity demanded to a change in price?

<p>Own-price elasticity of demand (A)</p> Signup and view all the answers

According to Exhibit 1, at what price is the demand considered elastic, given the elasticity coefficient of -1.28?

<p>€8.92 per liter (C)</p> Signup and view all the answers

Which of the following variables is NOT mentioned as a factor that influences consumers' demand for a product or service?

<p>Price of the product (A)</p> Signup and view all the answers

What is the demand function in Equation 1 saying?

<p>The quantity demanded of good X depends on the price of good X, consumers' income, and the price of good Y (D)</p> Signup and view all the answers

In Equation 2, what does the negative sign on the coefficient of gasoline price indicate?

<p>As the price of gasoline rises, the quantity demanded of gasoline will decrease (B)</p> Signup and view all the answers

If the price of gasoline (Px) is €1.48 per liter, per household income (I) is €50,000, and the price of the average automobile (Py) is €20,000, what is the per-household monthly demand for gasoline according to the function in Equation 2?

<p>47.54 liters (D)</p> Signup and view all the answers

Which of the following statements is true about own-price elasticity of demand?

<p>When the magnitude of the own-price elasticity coefficient is less than one, demand is said to be elastic. (C)</p> Signup and view all the answers

What does a price elasticity of demand of -0.2 mean?

<p>A 1% increase in price leads to a 0.2% decrease in quantity demanded. (B)</p> Signup and view all the answers

According to the text, what does the inverse demand function represent?

<p>The relationship between price and quantity demanded. (A)</p> Signup and view all the answers

According to Exhibit 2, where is demand considered inelastic for a negatively sloped linear demand curve?

<p>Below the midpoint. (B)</p> Signup and view all the answers

What is the formula for own-price elasticity of demand?

<p>$E_d = \frac{% \Delta Q},{% \Delta P}$ (C)</p> Signup and view all the answers

What does a negative sign on the coefficient of gasoline price in the demand function indicate?

<p>An inverse relationship between price and quantity demanded. (D)</p> Signup and view all the answers

Which measure of sensitivity does not depend on units of measure?

<p>Price elasticity of demand (D)</p> Signup and view all the answers

What does a price elasticity of demand of -0.2 mean?

<p>A 1% rise in price would result in a fall in quantity demanded of 0.2% (A)</p> Signup and view all the answers

What is the formula for own-price elasticity of demand?

<p>E​p​dx​ ​​ = ​( ​ _ ​Δ ​P​ ​) ​ ​​​(_ ​ d ​)​​​ ​Qx​ ​​ x Δ ​Qx​d​​ ​Px​ ​ (C)</p> Signup and view all the answers

What does the negative sign on the coefficient of gasoline price in the demand function indicate?

<p>There is an inverse relationship between price and quantity demanded (B)</p> Signup and view all the answers

Which of the following is true about the study of economics?

<p>It is divided into macroeconomics and microeconomics (B)</p> Signup and view all the answers

What is the purpose of the CFA Program Curriculum?

<p>To prepare candidates for the CFA Level I exam (B)</p> Signup and view all the answers

What is the measure of sensitivity of quantity demanded to a change in price?

<p>Price elasticity of demand (C)</p> Signup and view all the answers

According to the text, what are the two broad areas of study in economics?

<p>Macroeconomics and microeconomics (D)</p> Signup and view all the answers

Which of the following variables is NOT mentioned as a factor that influences consumers' demand for a product or service?

<p>Price of good Y (B)</p> Signup and view all the answers

What is the measure of sensitivity of quantity demanded to a change in price?

<p>Price elasticity of demand (D)</p> Signup and view all the answers

What is the formula for own-price elasticity of demand?

<p>$E = \frac{%\Delta Q},{%\Delta P}$ (C)</p> Signup and view all the answers

According to Exhibit 1, at what price is the demand considered elastic, given the elasticity coefficient of -1.28?

<p>€2.48 per liter (A)</p> Signup and view all the answers

According to the text, what is the purpose of the CFA Program Curriculum?

<p>To provide accurate and authoritative information on economics (C)</p> Signup and view all the answers

What does a negative sign on the coefficient of gasoline price in the demand function indicate?

<p>The demand for gasoline is inversely related to its price (B)</p> Signup and view all the answers

What is the formula for own-price elasticity of demand?

<p>E = (Q2 - Q1) / (P2 - P1) (A)</p> Signup and view all the answers

Which organization owns the trademarks CFA®, Chartered Financial Analyst®, AIMR-PPS®, and GIPS®?

<p>CFA Institute (D)</p> Signup and view all the answers

Which of the following is NOT a topic covered in the Economics Learning Module 1?

<p>Aggregate Output, Prices, and Economic Growth (C)</p> Signup and view all the answers

What is the measure of sensitivity of quantity demanded to a change in price?

<p>Price Elasticity of Demand (D)</p> Signup and view all the answers

What does the negative sign on the coefficient of gasoline price in the demand function indicate?

<p>There is a negative relationship between gasoline price and quantity demanded (B)</p> Signup and view all the answers

What is the formula for price elasticity of demand?

<p>(\frac{{\Delta P}},{{\Delta Q}}) (B)</p> Signup and view all the answers

Which of the following variables is NOT mentioned as a factor that influences consumers' demand for a product or service?

<p>The price of the product or service (B)</p> Signup and view all the answers

According to the text, what is the slope of the demand curve?

<p>Negative (A)</p> Signup and view all the answers

What does a negative sign on the coefficient of gasoline price in the demand function indicate?

<p>Gasoline and automobiles have a negative cross-price elasticity of demand (B)</p> Signup and view all the answers

What is the per-household monthly demand for gasoline according to the function in Equation 2, if the price of gasoline (Px) is €1.48 per liter, per household income (I) is €50,000, and the price of the average automobile (Py) is €20,000?

<p>47.54 liters (A)</p> Signup and view all the answers

Which measure of sensitivity does not depend on units of measure?

<p>Price elasticity of demand (C)</p> Signup and view all the answers

What is the formula for own-price elasticity of demand?

<p>Epd = %ΔQx / %ΔPx (C)</p> Signup and view all the answers

What does a negative sign on the coefficient of gasoline price in the demand function indicate?

<p>An increase in gasoline price leads to a decrease in quantity demanded (D)</p> Signup and view all the answers

What is the relationship between price and output in a perfectly competitive market?

<p>Price and output are negatively related (B)</p> Signup and view all the answers

Which of the following statements is true about the own-price elasticity of demand?

<p>The own-price elasticity of demand is always negative. (C)</p> Signup and view all the answers

When is demand considered to be inelastic?

<p>When the magnitude of the own-price elasticity coefficient is less than one. (A)</p> Signup and view all the answers

What does it mean when demand is said to be elastic?

<p>The quantity demanded is very sensitive to changes in price. (A)</p> Signup and view all the answers

What does it mean when demand is said to be unit elastic?

<p>The quantity demanded is moderately affected by changes in price. (B)</p> Signup and view all the answers

What is the formula for calculating the own-price elasticity of demand?

<p>$E_d = \frac{P},{Q} \cdot \frac{\Delta Q},{\Delta P}$ (D)</p> Signup and view all the answers

What does the term $P/Q$ represent in the formula for calculating the own-price elasticity of demand?

<p>The slope of the demand curve. (C)</p> Signup and view all the answers

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