Economics_Module_5__Elasticity.pdf

Economics Module 5: Elasticity Your Name: 1. Which type of supply elasticity is characterized by the quantity supplied remaining unchanged despite price changes? A. Perfectly Inelastic Supply B. Unit Elastic Supply C. Perfectly Elastic Supply D. Inelastic Supply 2. What factor tends t...

Economics Module 5: Elasticity Your Name: 1. Which type of supply elasticity is characterized by the quantity supplied remaining unchanged despite price changes? A. Perfectly Inelastic Supply B. Unit Elastic Supply C. Perfectly Elastic Supply D. Inelastic Supply 2. What factor tends to make the supply of a product more elastic? A. Excess production capacity B. Limited availability of inputs C. High initial production costs D. Low production capacity 3. Which example best illustrates an inelastic supply? A. Automobile manufacturing with adequate resources B. Electronics production during peak demand C. Wheat supply during the growing season D. Soft drink production adjusting to seasonal trends 4. If a 20% increase in price leads to a 20% increase in quantity supplied, this type of elasticity is called what? A. Perfectly Elastic Supply B. Inelastic Supply C. Perfectly Inelastic Supply D. Unit Elastic Supply 5. What generally happens to supply elasticity over time? A. It becomes more inelastic B. It fluctuates randomly C. It becomes more elastic D. It remains constant 6. In which market condition is the supply considered perfectly elastic? A. When producers can’t supply anything below a certain price B. When quantity supplied remains unchanged regardless of price C. When supply can change drastically with minor price fluctuations D. When supply gradually adjusts to price changes 7. Which condition is NOT a determinant of price elasticity of supply? A. Spare production capacity B. Consumer demand elasticity C. Time period for production D. Availability of inputs 8. Which scenario best depicts the concept of perfectly inelastic supply? A. The supply of rare art pieces remains constant despite price spikes B. The supply of bread increases as wheat prices go up C. The supply of smartphones rises during holiday sales D. The supply of cars adjusts based on consumer preference 9. Which type of goods is likely to have a more elastic supply? A. Perishable goods like fruits and vegetables B. Durable goods like cars and electronics C. Luxury items with low demand D. Goods with high transportation costs 10. What role does flexibility in the production process play in supply elasticity? A. It limits the variety of products that can be offered. B. It has no effect on price elasticity of supply. C. It increases costs for manufacturers. D. It allows firms to quickly adapt and produce different goods. 11. How is Price Elasticity of Supply (PES) calculated? A. Using the formula: PES = (% change in quantity supplied) / (% change in price) B. By comparing the change in price to the change in quantity supplied. C. By assessing the total revenue generated from sales. D. By dividing price changes by output changes. 12. Why might a government impose price controls on essential goods? A. To prevent producers from raising prices significantly when supply is inelastic. B. To encourage competition among producers. C. To increase production in elastic supply markets. D. To stabilize demand for luxury goods. 13. In which scenario is supply likely to be inelastic? A. When crops are planted and require time to grow. B. When numerous suppliers compete in a market. C. When substitutes are readily available. D. When production can be easily ramped up. 14. What does a Price Elasticity of Supply (PES) of 1 indicate? A. Unit elastic supply where percentage changes in quantity and price are proportional. B. Highly inelastic supply where supply cannot change at all. C. Inelastic supply with minimal response to price changes. D. Elastic supply where quantity supplied responds significantly to price changes. 15. How do firms use PES in their production decisions? A. To analyze long-term investment strategies. B. To forecast consumer preferences. C. To determine how much to increase production in response to price rises. D. To decide whether to enter new markets. 16. Which of the following best explains the impact of supply elasticity on market predictions? A. Elastic supply restricts producers from adjusting to price changes. B. Inelastic supply ensures stable markets without fluctuations. C. High elastic supply means markets can adjust quickly to unexpected shocks. D. Supply elasticity does not influence market conditions. 17. What happens to demand when the price of a product rises from $10 to $12 and the quantity demanded falls from 100 units to 80 units? A. Demand increases. B. Demand is completely elastic. C. Demand is unit elastic. D. Demand is inelastic. 18. How can businesses utilize price elasticity of demand to maximize revenue? A. Lower prices for inelastic goods. B. Raise prices for elastic goods. C. Lower prices for elastic goods. D. Maintain constant prices regardless of demand. 19. Which of the following goods is likely to be taxed by the government due to its inelastic demand? A. Fresh fruits B. Luxury cars C. Electronics D. Cigarettes 20. What does a Price Elasticity of Supply (PES) value greater than 1 indicate? A. Supply is elastic. B. Supply cannot respond to price changes. C. Supply is inelastic. D. Supply remains unchanged. 21. If consumers react strongly to price changes, how is the demand for that product characterized? A. Perfectly inelastic. B. Unit elastic. C. Inelastic. D. Elastic. 22. What is the implication of having an elastic demand for a business during pricing strategy? A. Price changes have no effect on total revenue. B. Demand will not change regardless of price. C. Lowering prices will attract more customers. D. Raising prices will significantly boost revenue. 23. Which of the following best describes a scenario where demand is inelastic? A. Consumers continue to buy despite price increases. B. Consumers switch to other products. C. Consumers only buy based on seasonal prices. D. Consumers buy less when prices rise. 24. What does a PED of -1 signify about the relationship between price and quantity demanded? A. Demand is unit elastic. B. Demand is highly inelastic. C. Demand is perfectly elastic. D. Demand decreases significantly. 25. What does elasticity measure in economics? A. The maximum price consumers are willing to pay B. Total revenue generated from sales C. The total quantity demanded at a fixed price D. Sensitivity of quantity demanded or supplied to changes in variables 26. Which of the following factors is least likely to influence elasticity? A. Time frame for adjustment B. Market competition level C. Proportion of income spent on the good D. Availability of substitutes 27. What type of goods do governments often target for taxation due to their inelastic demand? A. High-end electronics B. Inelastic goods like cigarettes C. Luxury items D. Necessities like bread 28. What does a Price Elasticity of Demand (PED) value greater than 1 indicate? A. Demand is unitary elastic B. Demand is inelastic C. Demand is perfectly inelastic D. Demand is elastic 29. Why do luxury goods like designer handbags have elastic demand? A. They require a significant portion of consumer income B. They are easily substituted with other products C. They are necessities for all consumers D. Their prices are fixed by the government 30. In which scenario would price elasticity of demand (PED) likely be higher? A. Goods with many available substitutes B. Necessities that have few substitutes C. Consumers have limited time to adjust their purchases D. Goods that make up a small portion of income 31. What does inelastic demand imply about consumer behavior? A. Quantity demanded does not change significantly with price changes B. Consumers are highly responsive to price changes C. Demand decreases with income increases D. Consumers will increase purchases with rising prices 32. How does the elasticity of demand change over time? A. Elasticity tends to be lower in the long run B. Elasticity tends to be higher in the long run C. Elasticity remains constant regardless of time D. Elasticity can confuse long-term adjustments 33. What does Income Elasticity of Demand (YED) measure? A. The responsiveness of the quantity demanded for a good to a change in consumer income B. The responsiveness of quantity supplied to changes in consumer preference C. The impact of advertising on the demand for different goods D. The change in quantity demanded with changes in the price of substitutes 34. Which of the following indicates that a good is considered a luxury? A. YED < 0 B. 0 < YED < 1 C. YED > 1 D. YED = 1 35. What happens to the demand for inferior goods as income increases? A. Demand remains constant regardless of income changes B. Demand increases as people prefer higher-quality goods C. Demand decreases as consumers shift to better alternatives D. Demand increases proportionally with income 36. What does Cross Elasticity of Demand (XED) indicate when it is greater than zero? A. The goods are inferior B. The goods are unrelated C. The goods are complementary D. The goods are substitutes 37. During economic growth, what might a business expect regarding demand for luxury goods? A. Demand for luxury goods will fluctuate unpredictably B. Demand for luxury goods will remain unchanged C. Demand for luxury goods will decrease significantly D. Demand for luxury goods will increase 38. If the price of tea increases causing an increase in the demand for coffee, what does this indicate about the relationship between these products? A. They are complements B. They are substitutes C. They are inferior goods D. They are unrelated goods 39. How is a good classified if its YED is between 0 and 1? A. Luxury good B. Essential good C. Normal good D. Inferior good 40. What does it mean if the YED of a product is negative? A. The product is a luxury good B. The product is a normal good C. The product is a substitute D. The product is an inferior good