Elasticity of demand measures the
A Change in demand
B Change in quantity demanded
C Responsiveness of demand to changes in determinants
D Slope of demand curve
Elasticity of demand measures how much quantity demanded responds to changes in price, income, or prices of related goods.
Price elasticity of demand refers to responsiveness of quantity demanded to change in
A Income
B Taste
C Price
D Population
Price elasticity measures how quantity demanded changes when the price of the commodity changes.
If percentage change in quantity demanded is greater than percentage change in price, demand is
A Perfectly inelastic
B Elastic
C Unitary elastic
D Inelastic
When quantity demanded responds more than proportionately to price change, demand is elastic.
Demand is said to be unitary elastic when elasticity is
A Greater than one
B Less than one
C Equal to one
D Zero
Unitary elasticity occurs when percentage change in quantity demanded equals percentage change in price.
Perfectly inelastic demand has elasticity equal to
A Zero
B One
C Infinity
D Negative one
With perfectly inelastic demand, quantity demanded does not change at all with price changes.
Perfectly elastic demand has elasticity equal to
A Zero
B One
C Infinity
D Negative infinity
In perfectly elastic demand, even a small change in price causes infinite change in quantity demanded.
A downward sloping straight-line demand curve has elasticity that
A Is constant at all points
B Increases downward
C Decreases downward
D Is zero everywhere
On a straight-line demand curve, elasticity decreases as we move down the curve from left to right.
At the midpoint of a straight-line demand curve, price elasticity of demand is
A Zero
B Less than one
C Equal to one
D Infinite
At the midpoint, elasticity is exactly equal to one.
At the upper end of a linear demand curve, elasticity is
A Zero
B Unitary
C Less than one
D Greater than one
At the upper portion of the demand curve, elasticity tends to be greater than one.
At the lower end of a straight-line demand curve, elasticity is
A Zero
B One
C Infinite
D Negative
At the lower end, demand becomes perfectly inelastic, making elasticity zero.
Income elasticity of demand measures responsiveness of demand to changes in
A Price
B Income
C Taste
D Population
Income elasticity measures how demand changes as consumer income changes.
Income elasticity of demand for normal goods is
A Zero
B Negative
C Positive
D Infinite
Demand for normal goods increases with increase in income, giving positive income elasticity.
Income elasticity of demand for inferior goods is
A Positive
B Negative
C Zero
D Infinite
Demand for inferior goods falls as income rises, resulting in negative income elasticity.
Income elasticity of demand for necessities is generally
A Greater than one
B Equal to one
C Less than one
D Negative
Necessities show less than proportionate increase in demand with income rise.
Income elasticity of demand for luxury goods is usually
A Less than one
B Equal to one
C Zero
D Greater than one
Demand for luxury goods increases more than proportionately with income.
Cross elasticity of demand measures change in demand of one good due to change in
A Its own price
B Consumer income
C Price of another good
D Population
Cross elasticity examines interdependence between goods.
Cross elasticity between substitute goods is
A Negative
B Zero
C Positive
D Infinite
When price of one substitute rises, demand for the other increases.
Cross elasticity of demand between complementary goods is
A Positive
B Negative
C Zero
D One
Complementary goods move together; price rise of one reduces demand for the other.
Cross elasticity of demand between unrelated goods is
A Positive
B Negative
C Zero
D Infinite
Price change of one unrelated good does not affect demand for the other.
Which elasticity concept helps firms in pricing related products?
A Price elasticity
B Income elasticity
C Cross elasticity
D Demand elasticity
Cross elasticity helps understand demand interdependence between related goods.
Percentage method of measuring elasticity is also known as
A Total outlay method
B Point method
C Ratio method
D Arc method
Elasticity is measured as ratio of percentage change in quantity to percentage change in price.
Arc elasticity of demand is used when
A Price change is very small
B Price change is large
C Demand curve is vertical
D Demand is perfectly elastic
Arc elasticity measures elasticity over a range of prices.
Point elasticity of demand is measured when
A Price change is large
B Demand curve is curved
C Price change is infinitesimal
D Income changes
Point elasticity applies when price change is very small.
Total expenditure method measures elasticity by observing changes in
A Total cost
B Total revenue
C Total expenditure
D Total utility
It measures elasticity by comparing total expenditure before and after price change.
If price falls and total expenditure increases, demand is
A Inelastic
B Elastic
C Unitary elastic
D Perfectly inelastic
In elastic demand, price and total expenditure move in opposite directions.
If price rises and total expenditure remains constant, demand is
A Elastic
B Inelastic
C Perfectly elastic
D Unitary elastic
With unitary elasticity, price change does not affect total expenditure.
If price rises and total expenditure increases, demand is
A Elastic
B Inelastic
C Unitary elastic
D Perfectly elastic
In inelastic demand, price and total expenditure move in the same direction.
Availability of substitutes makes demand
A Perfectly inelastic
B Inelastic
C Elastic
D Unitary elastic
More substitutes allow consumers to switch easily, increasing elasticity.
Demand for necessities tends to be
A Elastic
B Inelastic
C Perfectly elastic
D Unitary elastic
Necessities must be consumed regardless of price changes.
Demand becomes more elastic when
A Goods have fewer substitutes
B Time period is short
C Goods take large share of income
D Goods are necessities
Consumers are more sensitive to price changes when goods form a large part of income.
Longer time period generally makes demand
A Less elastic
B Perfectly inelastic
C More elastic
D Unitary elastic
Over time, consumers can adjust behavior, increasing elasticity.
Demand for addictive goods is generally
A Highly elastic
B Perfectly elastic
C Inelastic
D Unitary elastic
Addiction reduces responsiveness to price changes.
Demand for a good with many uses is
A Inelastic
B Elastic
C Perfectly inelastic
D Zero
Multiple uses increase alternatives, making demand elastic.
Elasticity of demand for jointly demanded goods is
A Elastic
B Inelastic
C Zero
D Infinite
Joint demand reduces responsiveness to price changes.
Demand for comfort goods is generally
A Perfectly inelastic
B Inelastic
C Elastic
D Zero
Comfort goods show moderate elasticity.
Price elasticity of demand is zero when demand curve is
A Horizontal
B Downward sloping
C Vertical
D Backward bending
Vertical demand curve shows no response to price change.
Elasticity of demand is influenced by
A Price only
B Income only
C Substitutes only
D Several factors
Elasticity depends on nature of goods, substitutes, income share, time period, etc.
Elasticity of demand helps government mainly in
A Production decisions
B Taxation policy
C Wage determination
D Utility measurement
Elasticity guides tax decisions to minimize burden.
For revenue maximization, firm should operate where demand is
A Inelastic
B Elastic
C Unitary elastic
D Perfectly elastic
Total revenue is maximized at unitary elasticity.
When elasticity of demand is greater than one, demand is
A Inelastic
B Elastic
C Unitary
D Perfect
Elastic demand shows greater responsiveness to price change.
Which elasticity helps in understanding effects of income redistribution?
A Price elasticity
B Cross elasticity
C Income elasticity
D Demand elasticity
Income elasticity shows how demand responds to income changes.
Cross elasticity between tea and coffee is likely to be
A Negative
B Positive
C Zero
D Infinite
Tea and coffee are substitutes.
Cross elasticity between car and petrol is
A Positive
B Zero
C Negative
D Infinite
Complementary goods have negative cross elasticity.
The demand for a good with narrow definition is
A Elastic
B Inelastic
C Perfectly elastic
D Unitary
Narrowly defined goods have more substitutes.
Demand for broadly defined goods tends to be
A Elastic
B Inelastic
C Perfectly elastic
D Infinite
Broad categories have fewer substitutes.
Elasticity concept is useful to producers mainly for
A Wage fixation
B Output planning
C Utility measurement
D Income distribution
Producers plan output and pricing using elasticity information.
Elasticity of demand measures
A Absolute change
B Percentage change
C Marginal change
D Total change
Elasticity uses percentage changes to allow comparison.
When elasticity is less than one, demand is
A Elastic
B Unitary
C Inelastic
D Perfect
Inelastic demand responds less than proportionately to price change.
Elasticity of demand for life-saving drugs is
A Elastic
B Inelastic
C Perfectly elastic
D Unitary elastic
Essential drugs must be consumed regardless of price.
Elasticity of demand is a
A Static concept
B Dynamic concept
C Hypothetical concept
D Normative concept
Elasticity reflects dynamic responsiveness to changing conditions.