90 Questions
Which organization owns the trademarks CFA®, Chartered Financial Analyst®, AIMR-PPS®, and GIPS®?
CFA Institute
What does the copyright cover in the CFA Program Curriculum 2024?
Both material written by the editor/s and individual selections
What is the purpose of the CFA Program Curriculum?
To provide accurate and authoritative information
What should be done if legal advice or other expert assistance is required?
Seek the services of a competent professional
Which of the following is a function of money?
Storing value
What is the study of production, distribution, and consumption called?
Economics
Which of the following is a topic in demand and supply analysis?
Price elasticity
What are the two broad areas of study in economics?
Microeconomics and macroeconomics
Which measure of sensitivity does not depend on units of measure?
Price elasticity of demand
What is the formula for own-price elasticity of demand?
%Δ Qxd / %Δ P
What does a price elasticity of demand of -0.2 mean?
Demand is inelastic
What is the measure of sensitivity of quantity demanded to a change in price?
Own-price elasticity
Which of the following is true about price elasticity of demand?
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price
What is the relationship between total, variable, fixed, and marginal costs?
Total cost equals variable cost plus fixed cost
In a perfectly competitive market, what is the relationship between price and output?
Price equals marginal cost
What is the role of demographics in business cycles?
Demographics can impact the economic cycle through changes in population size and age distribution
According to the text, what is the slope of the demand curve?
-0.156
According to the text, which variable is used to underscore the price of a good itself?
Px
According to the text, what does the inverse demand function represent?
The highest price willingly paid for each quantity
According to the text, what is the dependent variable in the demand function?
Qx
Which of the following is true about the theory of the consumer?
It focuses on consumption by utility-maximizing individuals.
What does the law of demand state?
As the price of a good falls, buyers will choose to buy less of it.
What is the demand function?
A relationship between the quantity demanded of a good and its own price, consumers' income, and the price of another good.
What does a negative sign on the coefficient of gasoline price in the demand function indicate?
As the price of gasoline goes up, fewer will likely be purchased and consumed.
Which of the following statements is true about own-price elasticity of demand?
When the magnitude is less than one, demand is said to be inelastic
If the elasticity coefficient is equal to negative one, what is the demand called?
Unit elastic
Why is the own-price elasticity of demand always negative?
Because a rise in price is associated with a fall in quantity demanded
At what price is the demand considered elastic, given the elasticity coefficient of -1.28?
€5 per liter
What term in Equation 6 of the text remains constant along the entire demand curve for a linear demand curve?
∆Q/∆P
According to Exhibit 2, where is demand considered inelastic for a negatively sloped linear demand curve?
Below the midpoint
Which of the following is a trademark owned by CFA Institute?
CFA®
What is the purpose of the CFA Program Curriculum?
To provide accurate and authoritative information
What is the measure of sensitivity of quantity demanded to a change in price?
Own-price elasticity of demand
Which organization owns the trademarks CFA®, Chartered Financial Analyst®, AIMR-PPS®, and GIPS®?
CFA Institute
According to the text, what are the two broad areas of study in economics?
Microeconomics and macroeconomics
What is the measure of sensitivity of quantity demanded to a change in price?
Price elasticity of demand
According to the text, what does the inverse demand function represent?
The relationship between price and quantity demanded
What does a negative sign on the coefficient of gasoline price in the demand function indicate?
An inverse relationship between gasoline price and quantity demanded
Which of the following is a topic covered in the Economics Learning Module 1?
Analysis of Market Structures
What is the relationship between price and output in a perfectly competitive market?
Price and output are directly related
What is the role of demographics in business cycles?
Demographics influence the timing and severity of business cycles
What does a negative sign on the coefficient of gasoline price in the demand function indicate?
Gasoline price has a negative impact on demand
According to the text, what is the slope of the demand curve?
-1/6.39
What does a negative sign on the coefficient of gasoline price in the demand function indicate?
An increase in gas price leads to a decrease in quantity demanded.
What is the measure of sensitivity of quantity demanded to a change in price?
Own-price elasticity of demand
According to Exhibit 1, at what price is the demand considered elastic, given the elasticity coefficient of -1.28?
€8.92 per liter
Which of the following variables is NOT mentioned as a factor that influences consumers' demand for a product or service?
Price of the product
What is the demand function in Equation 1 saying?
The quantity demanded of good X depends on the price of good X, consumers' income, and the price of good Y
In Equation 2, what does the negative sign on the coefficient of gasoline price indicate?
As the price of gasoline rises, the quantity demanded of gasoline will decrease
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?
47.54 liters
Which of the following statements is true about own-price elasticity of demand?
When the magnitude of the own-price elasticity coefficient is less than one, demand is said to be elastic.
What does a price elasticity of demand of -0.2 mean?
A 1% increase in price leads to a 0.2% decrease in quantity demanded.
According to the text, what does the inverse demand function represent?
The relationship between price and quantity demanded.
According to Exhibit 2, where is demand considered inelastic for a negatively sloped linear demand curve?
Below the midpoint.
What is the formula for own-price elasticity of demand?
$E_d = \frac{% \Delta Q},{% \Delta P}$
What does a negative sign on the coefficient of gasoline price in the demand function indicate?
An inverse relationship between price and quantity demanded.
Which measure of sensitivity does not depend on units of measure?
Price elasticity of demand
What does a price elasticity of demand of -0.2 mean?
A 1% rise in price would result in a fall in quantity demanded of 0.2%
What is the formula for own-price elasticity of demand?
Epdx = ( _ Δ P ) (_ d ) Qx x Δ Qxd Px
What does the negative sign on the coefficient of gasoline price in the demand function indicate?
There is an inverse relationship between price and quantity demanded
Which of the following is true about the study of economics?
It is divided into macroeconomics and microeconomics
What is the purpose of the CFA Program Curriculum?
To prepare candidates for the CFA Level I exam
What is the measure of sensitivity of quantity demanded to a change in price?
Price elasticity of demand
According to the text, what are the two broad areas of study in economics?
Macroeconomics and microeconomics
Which of the following variables is NOT mentioned as a factor that influences consumers' demand for a product or service?
Price of good Y
What is the measure of sensitivity of quantity demanded to a change in price?
Price elasticity of demand
What is the formula for own-price elasticity of demand?
$E = \frac{%\Delta Q},{%\Delta P}$
According to Exhibit 1, at what price is the demand considered elastic, given the elasticity coefficient of -1.28?
€2.48 per liter
According to the text, what is the purpose of the CFA Program Curriculum?
To provide accurate and authoritative information on economics
What does a negative sign on the coefficient of gasoline price in the demand function indicate?
The demand for gasoline is inversely related to its price
What is the formula for own-price elasticity of demand?
E = (Q2 - Q1) / (P2 - P1)
Which organization owns the trademarks CFA®, Chartered Financial Analyst®, AIMR-PPS®, and GIPS®?
CFA Institute
Which of the following is NOT a topic covered in the Economics Learning Module 1?
Aggregate Output, Prices, and Economic Growth
What is the measure of sensitivity of quantity demanded to a change in price?
Price Elasticity of Demand
What does the negative sign on the coefficient of gasoline price in the demand function indicate?
There is a negative relationship between gasoline price and quantity demanded
What is the formula for price elasticity of demand?
(\frac{{\Delta P}},{{\Delta Q}})
Which of the following variables is NOT mentioned as a factor that influences consumers' demand for a product or service?
The price of the product or service
According to the text, what is the slope of the demand curve?
Negative
What does a negative sign on the coefficient of gasoline price in the demand function indicate?
Gasoline and automobiles have a negative cross-price elasticity of demand
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?
47.54 liters
Which measure of sensitivity does not depend on units of measure?
Price elasticity of demand
What is the formula for own-price elasticity of demand?
Epd = %ΔQx / %ΔPx
What does a negative sign on the coefficient of gasoline price in the demand function indicate?
An increase in gasoline price leads to a decrease in quantity demanded
What is the relationship between price and output in a perfectly competitive market?
Price and output are negatively related
Which of the following statements is true about the own-price elasticity of demand?
The own-price elasticity of demand is always negative.
When is demand considered to be inelastic?
When the magnitude of the own-price elasticity coefficient is less than one.
What does it mean when demand is said to be elastic?
The quantity demanded is very sensitive to changes in price.
What does it mean when demand is said to be unit elastic?
The quantity demanded is moderately affected by changes in price.
What is the formula for calculating the own-price elasticity of demand?
$E_d = \frac{P},{Q} \cdot \frac{\Delta Q},{\Delta P}$
What does the term $P/Q$ represent in the formula for calculating the own-price elasticity of demand?
The slope of the demand curve.
Study Notes
This quiz will test your understanding of price elasticity of demand and how to calculate and interpret price, income, and cross-price elasticities. You will also learn about the factors that affect each measure.
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