Price Elasticity Of Demand Quiz

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Do you know about the price elasticity of demand? Try out this price elasticity of demand quiz to check your knowledge and see how updated you are. Basically, price elasticity is the measurement of changes in users' consumption due to the price change of a product. This quiz will help you check your knowledge as well as practice new things. If you think you can ace, go for it. All the best! If you find the quiz informative, share it with others also.

• 1.

If you slow down buying because of  a price increase, your demand is

• A.

Elastic

• B.

Inelastic

• C.

Strong

• D.

Normal

A. Elastic
Explanation
If you slow down buying because of a price increase, it indicates that your demand is elastic. This means that you are sensitive to changes in price and your purchasing behavior is responsive to price fluctuations. When the price increases, you reduce your quantity demanded, which suggests that your demand is elastic.

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• 2.

If you spend a very small proportion of your income on a product, then

• A.

The demand for that product will tend to be price elastic.

• B.

The demand for that product will tend to be price inelastic.

• C.

You will wait for a sale before you buy the item.

• D.

You will stop buying it if the prices rises even a little.

B. The demand for that product will tend to be price inelastic.
Explanation
If you spend a very small proportion of your income on a product, it means that the price of the product does not significantly affect your purchasing decision. This suggests that the demand for the product is price inelastic, as even a change in price will not greatly impact your decision to buy the item.

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• 3.

When the percentage change in the price exceeds the percentage change in quantity demanded, then demand is

• A.

Inelastic

• B.

Unitary elastic

• C.

Elastic

• D.

Irrelevant

A. Inelastic
Explanation
When the percentage change in the price exceeds the percentage change in quantity demanded, it indicates that demand is inelastic. This means that the quantity demanded is not very responsive to changes in price. In other words, even if the price increases or decreases, the quantity demanded remains relatively stable. This suggests that consumers are not very sensitive to price changes and are willing to pay the higher price without significantly reducing their demand for the product.

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• 4.

Which of the following is an example of a good with inelastic demand?

• A.

Fresh lobster

• B.

HD flat panel tv sets

• C.

Laptop computers

• D.

Life-saving medicine

D. Life-saving medicine
Explanation
Life-saving medicine is an example of a good with inelastic demand because it is a necessity for individuals who need it to survive or improve their health. The demand for life-saving medicine is not significantly affected by changes in price, as people are willing to pay any price to obtain it. The availability of substitutes is limited, making the demand for this good relatively inelastic. In contrast, goods like fresh lobster, HD flat panel TV sets, and laptop computers are not necessities and have more elastic demand, as consumers have more options and can easily switch to alternatives.

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• 5.

If a good has a lot of substitutes, then its demand will tend to be

• A.

Elastic

• B.

Inelastic

• C.

Unitary

• D.

None of these

A. Elastic
Explanation
If a good has a lot of substitutes, it means that there are many alternative products that consumers can choose from. This gives consumers the flexibility to switch to other options if the price of the good in question increases. As a result, even a small change in price will lead to a significant change in the quantity demanded, making the demand for the good elastic. Therefore, the correct answer is elastic.

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• 6.

Mercedes makes a luxury car called the Maybach, which sells for approximately \$490,000. base price. One would expect the demand for this product to be

• A.

Elastic

• B.

Inelastic

• C.

Unitary

• D.

None of these

A. Elastic
Explanation
The demand for the Mercedes Maybach luxury car is expected to be elastic because it is a high-priced product. When the price of a luxury car increases, the demand for it tends to decrease as consumers have more alternatives and are more price-sensitive. Therefore, a small change in price is likely to have a significant impact on the quantity demanded, making the demand elastic.

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• 7.

If billionaire Bill Gates decides he has to have a Maybach, for him, it has demand that

• A.

Elastic

• B.

Inelastic

• C.

Unitary

• D.

None of these

B. Inelastic
Explanation
Bill Gates, being a billionaire, has a high purchasing power and can afford to buy a Maybach without considering the price. In this scenario, the demand for a Maybach is likely to be inelastic because even if the price of the car were to increase, it would not significantly affect Bill Gates' decision to purchase it. The demand for a product is considered inelastic when the change in price has a minimal impact on the quantity demanded.

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• 8.

Total revenue is defined as

• A.

The amount of profit a company makes

• B.

The amount of profit a company makes after paying taxes

• C.

The total amount of money a company takes in for selling its goods

• D.

The amount of money affected by price elasticity

C. The total amount of money a company takes in for selling its goods
Explanation
Total revenue is the total amount of money a company generates from selling its goods or services. It represents the income received by the company before any expenses or deductions, such as taxes, are taken into account. It is a measure of the company's sales performance and indicates the overall financial health of the business.

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• 9.

A graph that shows a product with elastic demand will tend to be...

• A.

More straight up and down

• B.

Flatter

• C.

Backward bending

• D.

Finding equilibrium faster

B. Flatter
Explanation
A graph that shows a product with elastic demand will tend to be flatter. This is because elastic demand means that a small change in price will result in a relatively larger change in quantity demanded. As a result, the demand curve will be more responsive to price changes, leading to a flatter slope. A flatter demand curve indicates that consumers are more sensitive to price changes and will adjust their quantity demanded significantly in response to even small price changes.

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• 10.

Starbucks raised the price of a cup of coffee by 5 cents in early 2007, only to find that there was little or no change in the number of cups sold.  What does this say about Starbucks coffee demand?

• A.

It defies the laws of supply and demand

• B.

It acts like the demand for any luxury good

• C.

It is extremely inelastic

• D.

there is a lot of competition

C. It is extremely inelastic
Explanation
This answer suggests that the demand for Starbucks coffee is extremely inelastic. This means that even when the price of a cup of coffee increased by 5 cents, the quantity demanded did not significantly change. In other words, consumers are willing to pay a higher price for Starbucks coffee regardless of the increase in cost. This indicates that Starbucks has a strong and loyal customer base who are willing to pay a premium for their products.

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• Current Version
• Jul 23, 2023
Quiz Edited by
ProProfs Editorial Team
• May 06, 2013
Quiz Created by
NorrisJ

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