Practice Questions
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How does the price elasticity of demand affect total revenue when the price of a product decreases?
When the price falls, buyers buy more. Other options are incorrect because Some think revenue falls when demand is elastic, but that is wrong; Revenue...
If the demand for a good is perfectly inelastic, which of the following statements is true regarding price changes?
When demand is perfectly inelastic, the quantity demanded does not change no matter how the price moves. Other options are incorrect because The idea ...
A company notices that when they increase the price of their product by 10%, the quantity demanded decreases by 20%. How can the company use this information regarding price elasticity of demand to make strategic pricing decisions in the future?
When the price goes up, sales drop a lot, so the demand is elastic. Other options are incorrect because The mistake is thinking higher price always me...
In the context of perfect elasticity, which of the following statements best describes the shape of the demand curve and its economic implications?
A horizontal line shows that price stays fixed while quantity can change a lot. Other options are incorrect because A vertical line would mean quantit...
In the context of price elasticity of demand, which of the following scenarios best illustrates a unitary elastic demand, particularly when contrasting necessity and luxury goods?
When the price of a necessity rises by 10 percent, the quantity demanded falls by the same 10 percent. Other options are incorrect because The scenari...
Arrange the following steps in the process of determining the price elasticity of demand for a product: A) Calculate the percentage change in quantity demanded, B) Identify the initial price and quantity demanded, C) Calculate the percentage change in price, D) Use the elasticity formula to determine elasticity value.
First you need the starting price and quantity, because you cannot compare changes without a baseline. Other options are incorrect because This order ...
If the price of a product decreases and the quantity demanded increases significantly, what could be a primary reason for this scenario occurring?
When a product has many close substitutes, a price drop makes it cheaper than alternatives. Other options are incorrect because Luxury goods can have ...
How does a price elasticity of demand greater than 1 affect consumer behavior when prices increase?
When the elasticity is above 1, demand is elastic. Other options are incorrect because Some think demand stays the same when prices rise; A price hike...
If the price of a luxury car increases by 10% and the quantity demanded decreases by 15%, what does this indicate about the price elasticity of demand?
The elasticity is the ratio of the percent change in quantity to the percent change in price. Other options are incorrect because Some think a smaller...
Price elasticity of demand is to responsiveness of quantity demanded as consumer confidence is to what?
Price elasticity tells how much people buy when the price changes. Other options are incorrect because People might think saving ability matters, but ...
Which of the following statements accurately describe price elasticity of demand? Select all that apply.
Elasticity is a negative number because price and quantity demanded move in opposite directions. Other options are incorrect because People think high...
A local coffee shop decides to increase the price of its signature latte by 10%. After the price increase, the shop notices that the quantity of lattes sold decreases by 15%. What can the coffee shop conclude about the price elasticity of demand for their lattes?
Elasticity measures how much quantity changes when price changes. Other options are incorrect because The idea that quantity stays the same is called ...
A smartphone manufacturer notices that when they increase the price of their latest model by 10%, the quantity demanded decreases by 15%. How would you classify the price elasticity of demand for this smartphone?
When the price rises by 10% and the quantity sold falls by 15%, the drop in quantity is larger than the price rise. Other options are incorrect becaus...
The __________ of demand measures the responsiveness of quantity demanded to a change in price, indicating how much the quantity demanded will change in percentage terms in response to a one percent change in price.
It is the measure that tells how quantity changes when price changes. Other options are incorrect because This option talks about how quantity changes...
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