Practice Questions
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Which of the following best describes how the demand elasticity of a product might change over a longer time horizon?
Over time, people find new ways to adjust their spending. Other options are incorrect because This suggests that finding substitutes makes demand less...
In a market equilibrium graph, if the demand curve is highly elastic, what does this imply about consumer responsiveness to price changes?
When demand is highly elastic, consumers react strongly to price changes. Other options are incorrect because This option suggests that consumers only...
How does the availability of substitutes affect the elasticity of demand for a good, particularly in the context of public policy applications?
When there are many substitutes, people can easily switch to another product if the price goes up. Other options are incorrect because This answer sug...
If the price of a necessary medication increases by 20% and the quantity demanded decreases by only 5%, how would you describe the demand for this medication in terms of elasticity?
The demand is inelastic. Other options are incorrect because Some might think that a price increase always leads to a big drop in demand; Unitary elas...
A company experiences a significant drop in sales after increasing the price of its product. Which type of demand elasticity does this suggest, and what are the implications for the company's pricing strategy?
When demand is elastic, a small price increase leads to a big drop in sales. Other options are incorrect because This option suggests that customers w...
What does it mean when the price elasticity of demand is greater than 1?
When the price elasticity of demand is greater than 1, it means that consumers react strongly to price changes. Other options are incorrect because So...
Which of the following best describes a situation where the quantity demanded changes significantly in response to a price change?
Elastic demand means that when prices go up or down, people buy a lot less or a lot more. Other options are incorrect because Inelastic demand means t...
If the price of a necessity, like insulin for diabetics, increases by 10% and the quantity demanded decreases by only 2%, how would we classify the demand for this product?
The demand is inelastic. Other options are incorrect because Some might think demand is elastic because the price went up; Perfectly elastic means any...
A local bakery increases the price of its cupcakes from $2 to $2.20, which leads to a decrease in quantity demanded from 1000 cupcakes to 900 cupcakes. Based on this situation, how would you classify the demand for the bakery's cupcakes?
When the price goes up a little and people buy a lot less, we say demand is elastic. Other options are incorrect because This answer suggests that pri...
Which of the following statements accurately describe demand elasticity? Select all that apply.
All the statements provided misunderstand how demand elasticity works. Other options are incorrect because This statement is incorrect because it desc...
If the price of a product increases by 10% and the quantity demanded decreases by 15%, how would you classify the demand for this product?
When the price goes up and people buy much less, demand is elastic. Other options are incorrect because Some might think demand is inelastic, meaning ...
If a company raises the price of its product by 10% and observes that the quantity demanded decreases by 20%, what can be inferred about the demand elasticity of this product?
The demand is elastic. Other options are incorrect because This option suggests that people will buy the product no matter the price; Perfectly elasti...
Arrange the following steps in the process of analyzing demand elasticity:
First, you need to find out how much the quantity demanded changes when the price changes. Other options are incorrect because Some might think you sh...
If the relationship between price and quantity demanded can be represented as A:B, which of the following best represents the relationship between total revenue and price elasticity of demand? C:Total Revenue:D?
When demand is inelastic, people buy about the same amount even if the price goes up. Other options are incorrect because This answer suggests that wh...
A company increases the price of its product by 10%, and as a result, the quantity demanded decreases by 20%. Which category best describes the elasticity of demand for this product, and why?
Elastic demand means that a small change in price causes a big change in how much people want to buy. Other options are incorrect because Some might t...
When the price of a product increases and the quantity demanded decreases, this indicates that the demand is ______________.
When prices go up, people buy less. Other options are incorrect because Some might think elastic means any change in price affects demand; Perfectly e...
If a firm's product has an elastic demand and it raises its price by 10%, what is the most likely outcome for its total revenue?
When demand is elastic, people buy much less if the price goes up. Other options are incorrect because Some might think higher prices always mean more...
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