MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO ELASTICITY
What does elasticity measure in economics?
a) The responsiveness of quantity demanded to a change in income
b) The responsiveness of quantity demanded to a change in price
c) The responsiveness of supply to a change in income
d) The responsiveness of supply to a change in price
Answer: b) The responsiveness of quantity demanded to a change in price
If the price elasticity of demand for a good is greater than 1, it means that:
a) Demand is inelastic
b) Demand is elastic
c) Demand is unitary elastic
d) Demand is perfectly elastic
Answer: b) Demand is elastic
The midpoint formula for calculating price elasticity of demand is:
a) ((Q2 – Q1) / (P2 – P1)) * ((P2 + P1) / (Q2 + Q1))
b) ((Q2 – Q1) / (Q2 + Q1)) * ((P2 + P1) / (P2 – P1))
c) ((Q2 – Q1) / (Q2 + Q1)) / ((P2 – P1) / (P2 + P1))
d) ((Q2 – Q1) / (Q2 + Q1)) * ((P2 – P1) / (P2 + P1))
Answer: c) ((Q2 – Q1) / (Q2 + Q1)) / ((P2 – P1) / (P2 + P1))
Perfectly inelastic demand means that:
a) Quantity demanded is not affected by any change in price
b) Quantity demanded changes proportionately to changes in price
c) Quantity demanded changes infinitely with a small change in price
d) Quantity demanded is zero at any price level
Answer: a) Quantity demanded is not affected by any change in price
The income elasticity of demand for a normal good is:
a) Negative
b) Zero
c) Greater than one
d) Positive
Answer: d) Positive
If the cross-price elasticity between two goods is negative, it means that these goods are:
a) Complementary
b) Substitutes
c) Independent
d) Normal goods
Answer: a) Complementary
If the price of a good increases by 10% and the quantity demanded decreases by 5%, the price elasticity of demand is:
a) 0.5
b) 1
c) 2
d) 0.05
Answer: a) 0.5
Elasticity of supply measures the:
a) Responsiveness of quantity demanded to a change in price
b) Responsiveness of quantity supplied to a change in price
c) Responsiveness of price to a change in quantity demanded
d) Responsiveness of price to a change in quantity supplied
Answer: b) Responsiveness of quantity supplied to a change in price
If the price elasticity of supply is perfectly inelastic, the supply curve is:
a) Vertical
b) Horizontal
c) Upward sloping
d) Downward sloping
Answer: a) Vertical
When demand is perfectly elastic, the price elasticity of demand is:
a) Infinity
b) 1
c) 0
d) Negative infinity
Answer: a) Infinity
A luxury item would typically have a demand that is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
If the percentage change in quantity demanded is less than the percentage change in price, demand is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: b) Inelastic
The total revenue is maximized when demand is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: c) Unitary elastic
Cross-price elasticity measures the relationship between:
a) Quantity demanded and income
b) Quantity demanded and price
c) Quantity demanded of one good and the price of another good
d) Quantity supplied and price
Answer: c) Quantity demanded of one good and the price of another good
If the cross-price elasticity between two goods is positive, they are:
a) Complementary goods
b) Substitute goods
c) Independent goods
d) Inferior goods
Answer: b) Substitute goods
If the elasticity of supply is greater than 1, supply is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
An example of a product with perfectly elastic demand is:
a) Gasoline
b) Bread
c) Salt
d) Antique paintings
Answer: c) Salt
When the price of a good increases by 20% and the quantity supplied increases by 20%, the price elasticity of supply is:
a) 0.2
b) 1
c) 0
d) 4
Answer: b) 1
If the price elasticity of demand is 0.75, demand is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: b) Inelastic
The measure of responsiveness of the quantity demanded of a good to a change in consumer income is called:
a) Price elasticity of demand
b) Income elasticity of demand
c) Cross-price elasticity of demand
d) Price elasticity of supply
Answer: b) Income elasticity of demand
If a 10% increase in income leads to a 15% increase in the quantity demanded of a normal good, the income elasticity of demand is:
a) 0.67
b) 1.5
c) 2
d) 1.67
Answer: d) 1.67
A Giffen good is characterized by:
a) Having an income elasticity of demand greater than 1
b) Having a negative cross-price elasticity
c) Having a positive income elasticity of demand
d) Having a positively sloped demand curve
Answer: d) Having a positively sloped demand curve
If the price of a good increases and there is no change in quantity demanded, the price elasticity of demand is:
a) Zero
b) Infinity
c) Greater than 1
d) Less than 1
Answer: a) Zero
If the price elasticity of demand is -1.5, a 10% decrease in price will result in a:
a) 15% increase in quantity demanded
b) 10% decrease in quantity demanded
c) 15% decrease in quantity demanded
d) 10% increase in quantity demanded
Answer: a) 15% increase in quantity demanded
If a good has an income elasticity of demand of -0.5, it is considered:
a) An inferior good
b) A normal good
c) A luxury good
d) A Giffen good
Answer: a) An inferior good
A product with a high price elasticity of supply is likely to have:
a) Few close substitutes
b) Many close substitutes
c) A time period for adjustment in production
d) A perfectly elastic supply curve
Answer: c) A time period for adjustment in production
Perfectly inelastic supply means that:
a) Quantity supplied is not affected by any change in price
b) Quantity supplied changes proportionately to changes in price
c) Quantity supplied changes infinitely with a small change in price
d) Quantity supplied is zero at any price level
Answer: a) Quantity supplied is not affected by any change in price
The price elasticity of demand coefficient is calculated as the:
a) Percentage change in quantity demanded divided by the percentage change in price
b) Percentage change in price divided by the percentage change in quantity demanded
c) Change in quantity demanded divided by the change in price
d) Change in price divided by the change in quantity demanded
Answer: a) Percentage change in quantity demanded divided by the percentage change in price
If the price elasticity of supply is 0.2, a 10% increase in price will result in a:
a) 50% increase in quantity supplied
b) 2% increase in quantity supplied
c) 5% increase in quantity supplied
d) 20% increase in quantity supplied
Answer: b) 2% increase in quantity supplied
When demand is unitary elastic, the price elasticity of demand is:
a) 1
b) 0
c) Infinity
d) Negative infinity
Answer: a) 1
The elasticity coefficient is a measure of:
a) Slope of the demand curve
b) Responsiveness of quantity demanded to a change in price
c) Total revenue
d) Profit maximization
Answer: b) Responsiveness of quantity demanded to a change in price
If the price elasticity of demand is -0.2, demand is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: b) Inelastic
If the price elasticity of supply is greater than 1, a 20% decrease in price will result in a:
a) 20% decrease in quantity supplied
b) 40% decrease in quantity supplied
c) 10% increase in quantity supplied
d) 20% increase in quantity supplied
Answer: d) 20% increase in quantity supplied
When two goods are unrelated to each other in consumption, the cross-price elasticity of demand is:
a) Positive
b) Negative
c) Zero
d) Infinite
Answer: c) Zero
The elasticity coefficient is always:
a) Positive
b) Negative
c) Zero
d) It can be positive, negative, or zero
Answer: d) It can be positive, negative, or zero
If a 20% increase in price results in a 10% decrease in quantity demanded, the price elasticity of demand is:
a) 0.5
b) 2
c) 0.1
d) 10
Answer: a) 0.5
A perfectly competitive market typically has:
a) Inelastic demand and inelastic supply
b) Elastic demand and elastic supply
c) Elastic demand and inelastic supply
d) Inelastic demand and elastic supply
Answer: b) Elastic demand and elastic supply
The price elasticity of demand tends to be higher in the:
a) Short run than in the long run
b) Long run than in the short run
c) Short run and long run equally
d) It does not vary between short run and long run
Answer: b) Long run than in the short run
If a good has a price elasticity of demand of -0.8, a 10% increase in price will result in a:
a) 8% increase in quantity demanded
b) 8% decrease in quantity demanded
c) 10% increase in quantity demanded
d) 10% decrease in quantity demanded
Answer: b) 8% decrease in quantity demanded
If the price elasticity of demand for a good is -1.2, it means that:
a) Demand is elastic
b) Demand is inelastic
c) Demand is unitary elastic
d) Demand is perfectly elastic
Answer: a) Demand is elastic
A necessity item would typically have a demand that is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: b) Inelastic
The elasticity of demand is affected by:
a) The availability of substitutes
b) The time horizon considered
c) The proportion of income spent on the good
d) All of the above
Answer: d) All of the above
When a good has a relatively small number of close substitutes, its demand tends to be:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: b) Inelastic
If the price elasticity of supply is 2, a 10% increase in price will result in a:
a) 5% increase in quantity supplied
b) 20% increase in quantity supplied
c) 2% increase in quantity supplied
d) 10% increase in quantity supplied
Answer: b) 20% increase in quantity supplied
If a good has an income elasticity of demand of 2.5, it is considered:
a) An inferior good
b) A normal good
c) A luxury good
d) A Giffen good
Answer: c) A luxury good
The price elasticity of supply tends to be higher when:
a) Producers have more time to respond to price changes
b) Producers have less time to respond to price changes
c) The good has no close substitutes
d) The good is a necessity
Answer: a) Producers have more time to respond to price changes
When a price increase leads to a proportionately smaller decrease in quantity demanded, demand is considered:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
If the price elasticity of demand is greater than 1 but less than infinity, demand is considered:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
If a good has a price elasticity of supply of 0.1, it means that the supply curve is:
a) Perfectly elastic
b) Perfectly inelastic
c) Relatively elastic
d) Relatively inelastic
Answer: b) Perfectly inelastic
A product with a low price elasticity of supply is likely to have:
a) Few close substitutes
b) Many close substitutes
c) A time period for adjustment in production
d) A perfectly elastic supply curve
Answer: c) A time period for adjustment in production
If the price of a good decreases by 10% and the quantity demanded increases by 20%, the price elasticity of demand is:
a) 0.5
b) 2
c) 3
d) 1
Answer: c) 3
If the price elasticity of demand for a good is 0.2, it means that demand is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: b) Inelastic
When the percentage change in quantity demanded is greater than the percentage change in price, demand is considered:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
The responsiveness of quantity supplied to a change in price is known as:
a) Price elasticity of demand
b) Income elasticity of demand
c) Price elasticity of supply
d) Cross-price elasticity of demand
Answer: c) Price elasticity of supply
If the price elasticity of supply is 1.5, a 10% decrease in price will result in a:
a) 15% decrease in quantity supplied
b) 10% decrease in quantity supplied
c) 15% increase in quantity supplied
d) 10% increase in quantity supplied
Answer: c) 15% increase in quantity supplied
When the percentage change in quantity demanded is equal to the percentage change in price, demand is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: c) Unitary elastic
The price elasticity of demand tends to be higher for:
a) Necessities than for luxuries
b) Luxuries than for necessities
c) Inferior goods than for normal goods
d) Normal goods than for inferior goods
Answer: b) Luxuries than for necessities
A zero price elasticity of demand indicates that demand is:
a) Perfectly elastic
b) Perfectly inelastic
c) Unitary elastic
d) Elastic
Answer: b) Perfectly inelastic
If a good has a cross-price elasticity of -0.7 with another good, they are likely to be:
a) Complementary goods
b) Substitute goods
c) Independent goods
d) Inferior goods
Answer: a) Complementary goods
If a good has an income elasticity of demand of 0.2, it is considered:
a) An inferior good
b) A normal good
c) A luxury good
d) A Giffen good
Answer: b) A normal good
The elasticity coefficient of supply is affected by:
a) The availability of inputs
b) Time required to produce the good
c) The technology used in production
d) All of the above
Answer: d) All of the above
If the price elasticity of demand is -2.5, a 20% decrease in price will result in a:
a) 50% increase in quantity demanded
b) 40% increase in quantity demanded
c) 10% increase in quantity demanded
d) 20% increase in quantity demanded
Answer: a) 50% increase in quantity demanded
When a small change in price leads to a large change in quantity demanded, demand is considered:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
If the price elasticity of demand is greater than 1 but less than infinity, demand is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
A good with numerous close substitutes tends to have a demand that is:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: a) Elastic
The price elasticity of demand measures the responsiveness of:
a) Quantity supplied to a change in price
b) Quantity demanded to a change in price
c) Price to a change in quantity demanded
d) Price to a change in quantity supplied
Answer: b) Quantity demanded to a change in price
If the price elasticity of supply is 0.5, a 20% increase in price will result in a:
a) 40% increase in quantity supplied
b) 10% increase in quantity supplied
c) 20% increase in quantity supplied
d) 5% increase in quantity supplied
Answer: d) 5% increase in quantity supplied
When the percentage change in quantity demanded is less than the percentage change in price, demand is considered:
a) Elastic
b) Inelastic
c) Unitary elastic
d) Perfectly elastic
Answer: b) Inelastic
The concept of elasticity is important in economics because it helps in understanding:
a) How taxes affect consumer behavior
b) How firms set prices
c) How markets allocate resources
d) All of the above
Answer: d) All of the above
If the price elasticity of supply is 1, a 10% increase in price will result in a:
a) 10% decrease in quantity supplied
b) 20% decrease in quantity supplied
c) 10% increase in quantity supplied
d) 20% increase in quantity supplied
Answer: c) 10% increase in quantity supplied
