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1.
The price elasticity of demand for a good is defined as:
A. The percentage change in demand divided by the percentage change in supply.
B. The percentage change in price divided by the percentage change in demand.
C. The percentage change in quantity demanded divided by the percentage change in price.
D. The percentage change in supply divided by the percentage change in demand.
2. If the income elasticity of demand for a good is negative, the good is classified as:
A. A luxury good.
B. A normal good.
C. An inferior good.
D. A Giffen good.
3. Which of the following is true if the cross elasticity of demand for goods X and Y is positive?
A. X and Y are complements.
B. X and Y are substitutes.
C. X and Y are unrelated goods.
D. X is inferior, and Y is normal.
4. If a product has a price elasticity of demand equal to -1.5, then demand is:
A. Perfectly inelastic.
B. Unitary elastic.
C. Elastic.
D. Inelastic.
5. If the price elasticity of demand for a good is 0.5, what happens when its price increases by 10%?
A. Demand decreases by 20%.
B. Demand decreases by 10%.
C. Demand decreases by 5%.
D. Demand increases by 5%.
6. If the income elasticity of demand for luxury goods is 2.0, a 5% increase in income will lead to:
A. A 2% increase in demand.
B. A 5% increase in demand.
C. A 10% increase in demand.
D. A 20% increase in demand.
7. Cross elasticity of demand measures:
A. The sensitivity of demand for one good to changes in the price of another good.
B. The change in supply when the price of a substitute changes.
C. The responsiveness of income to price changes.
D. The change in demand when income changes.
8. A negative value for cross elasticity of demand implies that:
A. The goods are unrelated.
B. The goods are complements.
C. The goods are substitutes.
D. The goods are inferior.
9. A product is considered price inelastic if:
A. Price elasticity of demand is greater than 1.
B. Price elasticity of demand is equal to 1.
C. Price elasticity of demand is less than 1.
D. Price elasticity of demand is negative.
10. If a good is perfectly inelastic, then:
A. Demand will not change regardless of the price change.
B. Demand will change proportionally with price.
C. Total revenue remains constant.
D. The good has many substitutes.
11. If the cross elasticity of demand for two goods is zero, then the goods are:
A. Substitutes.
B. Unrelated.
C. Complements.
D. Inferior.
12. Which of the following is true if the income elasticity of demand for a product is zero?
A. It is an inferior good.
B. It is a luxury good.
C. Demand does not change as income changes.
D. Demand increases as income decreases.
13. What does it mean if a product's price elasticity of demand is -0.8?
A. Demand is elastic.
B. Demand is inelastic.
C. Demand is unitary elastic.
D. Demand is perfectly inelastic.
14. Cross elasticity of demand for two goods X and Y is calculated as +1.5. What does this mean?
A. X and Y are complements.
B. X and Y are substitutes.
C. X is a normal good and Y is inferior.
D. X and Y are unrelated.
15. If a product has a perfectly elastic demand curve:
A. Any change in price will cause demand to fall to zero.
B. Any change in price will cause demand to increase infinitely.
C. Demand remains constant regardless of price.
D. Price remains constant regardless of demand.
16. A product with an income elasticity of demand of -1.2 is likely to be:
A. A luxury good.
B. A normal good.
C. An inferior good.
D. A Giffen good.
17. If the price elasticity of demand for a good is -2.0, a 15% price reduction will result in:
A. A 30% increase in demand.
B. A 7.5% increase in demand.
C. A 20% increase in demand.
D. A 10% increase in demand.
18. If cross elasticity of demand is -0.6, the goods in question are:
A. Complements.
B. Substitutes.
C. Unrelated.
D. Normal goods.
19. A product with a unitary price elasticity of demand will experience:
A. An increase in total revenue if price rises.
B. A decrease in total revenue if price rises.
C. No change in total revenue as price changes.
D. No change in demand as price changes.
20. If the price elasticity of demand for a good is -1, then:
A. A price rise will decrease total revenue.
B. A price rise will increase total revenue.
C. A price rise will not affect total revenue.
D. A price decrease will increase total revenue.

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1.

The price elasticity of demand for a good is defined as:

A. The percentage change in demand divided by the percentage change in supply.

B. The percentage change in price divided by the percentage change in demand.

D. The percentage change in supply divided by the percentage change in demand.

A. X and Y are complements.

B. X and Y are substitutes.

C. X and Y are unrelated goods.

D. X is inferior, and Y is normal.

A. Demand decreases by 20%.

B. Demand decreases by 10%.

C. Demand decreases by 5%.

D. Demand increases by 5%.

C. A 10% increase in demand.

D. A 20% increase in demand.

7. Cross elasticity of demand measures:

B. The change in supply when the price of a substitute changes.

C. The responsiveness of income to price changes.

D. The change in demand when income changes.

8. A negative value for cross elasticity of demand implies that:

A. The goods are unrelated.

B. The goods are complements.

C. The goods are substitutes.

D. The goods are inferior.

9. A product is considered price inelastic if:

A. Price elasticity of demand is greater than 1.

B. Price elasticity of demand is equal to 1.

C. Price elasticity of demand is less than 1.

D. Price elasticity of demand is negative.

10. If a good is perfectly inelastic, then:

A. Demand will not change regardless of the price change.

B. Demand will change proportionally with price.

C. Total revenue remains constant.

D. The good has many substitutes.

C. Demand does not change as income changes.

D. Demand increases as income decreases.

13. What does it mean if a product's price elasticity of demand is -0.8?

C. Demand is unitary elastic.

D. Demand is perfectly inelastic.

A. X and Y are complements.

B. X and Y are substitutes.

C. X is a normal good and Y is inferior.

D. X and Y are unrelated.

15. If a product has a perfectly elastic demand curve:

A. Any change in price will cause demand to fall to zero.

B. Any change in price will cause demand to increase infinitely.

C. Demand remains constant regardless of price.

D. Price remains constant regardless of demand.

16. A product with an income elasticity of demand of -1.2 is likely to be:

B. A 7.5% increase in demand.

C. A 20% increase in demand.

D. A 10% increase in demand.

18. If cross elasticity of demand is -0.6, the goods in question are:

19. A product with a unitary price elasticity of demand will experience:

A. An increase in total revenue if price rises.

B. A decrease in total revenue if price rises.

C. No change in total revenue as price changes.

D. No change in demand as price changes.

20. If the price elasticity of demand for a good is -1, then:

A. A price rise will decrease total revenue.