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Multiple Choice Quiz
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1
The price elasticity of demand measures:
A)how responsive sales are to changes in the price of related goods.
B)how responsive prices are to changes in quantity demanded.
C)how responsive prices are to changes in consumers' income.
D)how responsive quantity demanded for a good or service is to a change in its price.
2
The price elasticity of demand is calculated as:
A)the percentage change in quantity supplied divided by the percentage change in price.
B)the percentage change in quantity demanded divided by the percentage change in price.
C)the percentage change in price divided by the percentage change in quantity demanded.
D)the change in quantity demanded divided by the change in price.
3
Suppose the price of gasoline increases 40 percent, causing quantity demanded to fall 20 percent. The price elasticity of demand would be equal to the absolute value of:
A)0.5.
B)800.
C)2.
D)20.
4
Which of the following is not a determinant of the elasticity of demand?
A)Availability of substitutes
B)Luxuries versus necessities
C)Passage of time
D)Consumer income
5
If demand is inelastic:
A)the coefficient of elasticity is greater than one.
B)the percentage change in quantity demanded exceeds the percentage change in the price.
C)an increase in price will increase total revenue.
D)buyers are relatively sensitive to price changes.
6
Assume that the price of product Y decreases by 5 percent and the quantity supplied decreases by 2 percent. The coefficient of price elasticity of supply for good Y is:
A)negative and therefore Y is an inferior good.
B)less than one and therefore supply is inelastic.
C)more than one and therefore supply is elastic.
D)negative and therefore the supply curve is downward sloping.
7
The price elasticity of supply is measured as:
A)the percentage change in price divided by the percentage change in quantity supplied.
B)the change in price divided by the change in quantity demanded.
C)the percentage change in quantity supplied divided by the percentage change in price.
D)the change in quantity supplied divided by the change in price.
8
A reduction in the price of a good will increase total revenue if:
A)demand is inelastic.
B)demand is elastic.
C)demand is unitary elastic.
D)demand is perfectly inelastic.
9
Each of two firms willingly supplies 25,000 gadgets a month at a price of $13. If the price were to fall to $11, one of the firms would decrease its monthly production by 1,500 and the other would decrease its monthly production by 2,500. If these are the only two producers, the elasticity of supply in this market is:
A)0.25.
B)0.5.
C)1.
D)2.
10
A manufacturing firm lowers its price by 3 percent and finds its revenue has decreased. Which of the following best explains this outcome?
A)Demand elasticity is less than one.
B)Cross price elasticity is positive.
C)Income elasticity is negative.
D)Demand elasticity is positive.





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