Think you've mastered elasticity in microeconomics? Our free microeconomics elasticity quiz puts your skills to the ultimate test - covering everything from price and income elasticity to cross-price elasticity challenges. You'll apply theories to real-world scenarios, practice calculating coefficients, and interpret demand curves. Jump into a focused price elasticity test and tackle an interactive microeconomics supply and demand quiz that sharpens your understanding of supply and demand elasticity test, price elasticity of demand quiz, cross-price elasticity quiz, and get hands-on income elasticity practice. Tailored for students, future analysts, and economics enthusiasts, this friendly quiz will boost your confidence and pinpoint areas for improvement. Ready to see how elastic your knowledge really is? Start now and take the leap!
What does price elasticity of demand measure?
Responsiveness of quantity demanded to changes in price
Relationship between price and consumer income
Change in total revenue given a change in supply
Responsive changes in production cost
Price elasticity of demand quantifies how much the quantity demanded of a good responds to a change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. A higher elasticity indicates greater responsiveness. Learn more here.
If the price elasticity of demand for a product is 0.5, how is demand characterized?
Elastic
Unit elastic
Inelastic
Perfectly inelastic
An elasticity coefficient less than 1 in absolute value indicates inelastic demand, meaning quantity demanded changes proportionally less than price. When elasticity is 0.5, a 1% price change leads to only a 0.5% change in quantity demanded. Consumers are relatively unresponsive to price changes. Further reading.
When demand is elastic, what happens to total revenue if price increases?
Total revenue increases
Total revenue decreases
Total revenue remains unchanged
It is unpredictable
If demand is elastic (elasticity greater than 1), the percentage drop in quantity demanded exceeds the percentage price increase, causing total revenue (price × quantity) to fall. Consumers reduce purchases significantly when price rises. This relationship is known as the total revenue test. See details.
A positive cross-price elasticity of demand between two goods indicates they are:
Complements
Substitutes
Unrelated
Inferior goods
Cross-price elasticity measures how demand for one good responds to a price change in another. A positive value implies that when the price of one good rises, demand for the other increases, indicating they are substitutes. Consumers switch from the more expensive good to the other. Learn more.
Which elasticity value corresponds to perfectly inelastic demand?
0
1
Infinity
Greater than 1
Perfectly inelastic demand means quantity demanded does not change at all in response to price changes; its elasticity is zero. Consumers purchase the same amount regardless of price. Graphically, the demand curve is vertical. More information.
What elasticity value indicates unitary elasticity of demand?
0
Exactly 1
Greater than 1
Less than 1 but greater than 0
Unitary elasticity means the percentage change in quantity demanded equals the percentage change in price, yielding an elasticity of exactly one. Total revenue remains unchanged when price changes under unitary elasticity. This is a key concept in revenue analysis. Read more.
A negative income elasticity of demand implies the good is:
Normal good
Inferior good
Luxury good
Giffen good
Income elasticity of demand measures how quantity demanded responds to changes in consumer income. A negative coefficient indicates that quantity demanded falls when income rises, characterizing an inferior good. People substitute towards more preferred goods as they become wealthier. Source.
Which method calculates elasticity over a range of prices rather than at a point?
Point elasticity formula
Arc (midpoint) elasticity formula
Total revenue test
Cross-price method
The arc (midpoint) elasticity formula computes elasticity between two points by averaging the starting and ending prices and quantities. It avoids bias caused by direction of change. It is especially useful for larger discrete price changes. Further reading.
If supply is perfectly elastic, the supply curve is drawn as:
Vertical line
Horizontal line
Upward?sloping curve
Downward?sloping curve
Perfectly elastic supply means suppliers will provide any quantity at a given price but none at any different price. Graphically, this is a horizontal supply curve at that price. Small price changes cause infinite changes in quantity. Learn more.
A 10% increase in price leads to a 20% decrease in quantity demanded. What is the price elasticity of demand?
0.5
1.0
2.0
–0.5
Price elasticity is percentage change in quantity over percentage change in price: –20%/10% = –2. The magnitude (absolute value) is 2, indicating elastic demand. Negative sign shows inverse relationship. Reference.
Which factor tends to increase the price elasticity of demand for a good?
Lack of available substitutes
Good is considered a necessity
A large proportion of consumer income spent on the good
A very short time horizon
Goods that take up a larger share of consumer income tend to have more elastic demand because consumers are more sensitive to price changes. When substitutes are available or consumers can delay purchases, elasticity also increases. Short time horizons typically reduce elasticity. Learn more.
A cross-price elasticity of –3 between two products indicates:
Strong substitutes
Strong complements
Independent goods
Inferior and normal relationship
A negative cross-price elasticity means when the price of one good rises, demand for the other falls. A large negative value (–3) signals a strong complementary relationship. Consumers buy them together. Source.
An income elasticity of demand equal to 2.5 characterizes the good as:
Inferior good
Luxury good
Necessity
Giffen good
Income elasticity above 1 indicates a luxury good, where quantity demanded rises more than proportionally to income increases. Necessities have elasticity between 0 and 1. Negative values indicate inferior goods. Details here.
Which formula represents the point price elasticity of demand?
(?Q/?P) × (P/Q)
(dQ/dP) × (P/Q)
(?P/?Q) × (Q/P)
(Q/P) × (?P/?Q)
Point elasticity uses the derivative of quantity with respect to price multiplied by the ratio of price to quantity: (dQ/dP) × (P/Q). It measures responsiveness at a single point on the curve. This is suitable for infinitesimal changes. Learn more.
If the price elasticity of demand is –0.8, what should a firm do to increase total revenue?
Raise price
Lower price
Keep price constant
Increase advertising instead
When demand is inelastic (|elasticity| < 1), raising price leads to a smaller proportional drop in quantity, increasing total revenue. Conversely, lowering price would shrink revenue. Firms often exploit inelastic demand segments this way. Reference.
Price elasticity of supply measures the responsiveness of quantity supplied to changes in:
Consumer income
Price of the good
Prices of related goods
Production technology
Price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in the good’s price. It reflects producers’ responsiveness to price shifts. Factors like production flexibility and time horizon influence supply elasticity. More info.
Which of the following goods is most likely to have inelastic demand?
Gasoline
Luxury watches
High-end electronics
Vacation travel packages
Gasoline demand is relatively inelastic because consumers need it for daily transportation and have few immediate substitutes. Even when prices rise, quantity demanded falls only modestly. Urgency and lack of alternatives drive inelasticity. Source.
A steeper demand curve generally indicates that demand is:
More elastic
More inelastic
Unit elastic
Perfectly elastic
A steeper demand graph means a small change in price leads to a small change in quantity demanded, indicating low responsiveness or inelastic demand. Conversely, a flatter curve represents high elasticity. Shape reveals sensitivity to price. Learn more.
On a linear demand curve, at what point is demand unit elastic?
At the intercept with the horizontal axis
Exactly at the midpoint of the demand curve
At the intercept with the vertical axis
Every point is unit elastic
For a straight?line demand curve, elasticity varies along its length. It is exactly one at the midpoint, where percentage changes in price and quantity are equal in magnitude. Above this point demand is elastic; below it is inelastic. Learn more.
When a unit tax is imposed on a market and supply is perfectly inelastic, who bears the tax burden?
Consumers bear the entire tax
Producers bear the entire tax
Burden is shared equally
Neither bears the tax
If supply is perfectly inelastic, producers cannot alter quantity supplied regardless of price. Thus, the entire tax falls on suppliers because they cannot pass it to consumers through higher prices. The supply curve remains vertical. Details.
A cross-price elasticity of demand close to zero suggests the goods are:
Strong complements
Strong substitutes
Unrelated (independent) goods
Superior third-party goods
A cross?price elasticity near zero indicates that changes in the price of one good have virtually no effect on the demand for another. This means the goods are independent or unrelated. Consumers treat them separately. Learn more.
Why is long-run price elasticity of demand usually higher than short-run elasticity?
More substitutes and consumer adjustments are possible over time
Prices are fixed in the long run
Income effects dominate in the short run
Long-run demand curves are steeper
Over the long run, consumers can find or develop substitutes, adjust consumption habits, and respond fully to price changes, making demand more elastic. In the short run, habits and contracts restrict responsiveness. Time horizon is a key determinant. More info.
Which elasticity concept isolates only the substitution effect, holding utility constant?
Marshallian (uncompensated) elasticity
Hicksian (compensated) elasticity
Arc elasticity
Income elasticity
Hicksian or compensated elasticity uses income compensation to hold utility constant and measures the pure substitution effect of a price change. Marshallian (uncompensated) elasticity includes both substitution and income effects. The Hicksian approach isolates substitution. Learn more.
If supply elasticity is 0.3 and demand elasticity is 1.2, who bears the larger share of a per-unit tax?
Producers, because supply is more inelastic
Consumers, because demand is more elastic
Consumers, because demand is inelastic
Burden is shared equally
Tax burden falls more heavily on the side of the market that is more inelastic. Here supply elasticity (0.3) is less than demand elasticity (1.2), making supply more inelastic. Therefore producers bear the larger share of the tax. Reference.
A constant elasticity demand curve with equation P = Q^–2 implies which price elasticity everywhere on that curve?
–1
–2
–0.5
Varies along the curve
A constant elasticity demand function of the form P = Q^–? has elasticity equal to –? at every point. Here ? = 2, so price elasticity of demand is –2 throughout. It is independent of the specific price–quantity combination. See details.
Which elasticity measure uses the derivative when analyzing infinitesimal changes in price and quantity?
Arc elasticity
Point elasticity
Cross-price elasticity
Income elasticity
Point elasticity employs the derivative dQ/dP to assess responsiveness at a precise point on the demand curve for very small changes in price and quantity. Arc elasticity uses discrete differences over a range. Point elasticity is ideal for infinitesimal analysis. More info.
Given the linear demand curve P = 100 – 2Q, what is the price elasticity of demand at Q = 10?
–2
–4
–0.5
–1
Point elasticity is (dQ/dP) × (P/Q). From P = 100 – 2Q, dQ/dP = –½. At Q = 10, P = 80, so elasticity = (–0.5)×(80/10) = –4. Large magnitude indicates very elastic demand at that point. Reference.
A downward-sloping Engel curve with a negative slope indicates which type of good?
Normal good
Inferior good
Luxury good
Giffen good
An Engel curve plots income on the horizontal axis against quantity demanded on the vertical axis. A negative slope means that as income increases, quantity demanded falls, identifying an inferior good. Higher income leads consumers to substitute away. Learn more.
Which equation decomposes total price effect into substitution and income effects?
Slutsky equation
Shephard’s lemma
Roy’s identity
Hotelling’s lemma
The Slutsky equation separates the total effect of a price change into substitution (compensated) and income effects. It is fundamental in consumer theory for elasticity decomposition. Shephard’s lemma and Roy’s identity serve other purposes. See details.
If cross-price elasticity between A and B is –0.5 and between A and C is +0.5, what relationships exist?
A and B are substitutes; A and C are complements
A and B are complements; A and C are substitutes
Both pairs are unrelated
Both pairs are perfect substitutes
A negative cross-price elasticity (–0.5) indicates that A and B are complements. A positive cross-price elasticity (+0.5) indicates that A and C are substitutes. Magnitude shows the strength of the relationship. More info.
0
{"name":"What does price elasticity of demand measure?", "url":"https://www.quiz-maker.com/QPREVIEW","txt":"What does price elasticity of demand measure?, If the price elasticity of demand for a product is 0.5, how is demand characterized?, When demand is elastic, what happens to total revenue if price increases?","img":"https://www.quiz-maker.com/3012/images/ogquiz.png"}
Study Outcomes
Understand Price Elasticity of Demand -
Identify how changes in price influence quantity demanded and distinguish between elastic, inelastic, and unitary demand.
Calculate Income Elasticity of Demand -
Compute the responsiveness of demand to income variations and classify goods as normal, inferior, or luxury based on elasticity values.
Analyze Cross-Price Elasticity -
Evaluate the relationship between related goods by measuring how price changes of one product affect the demand for another.
Assess Supply Elasticity -
Determine producer responsiveness by calculating how supply quantities adjust in reaction to price fluctuations.
Apply Elasticity Concepts in Market Contexts -
Interpret elasticity measures to predict real-world market behavior and make informed economic decisions.
Cheat Sheet
Price Elasticity of Demand (PED) -
PED quantifies how quantity demanded changes in response to a price shift using PED = (%ΔQd) / (%ΔP). For instance, a PED of -2 implies a 10% price rise slashes demand by 20%, highlighting elastic responsiveness. Remember the rule "elastic >1, inelastic <1" as a quick mnemonic.
Income Elasticity of Demand (YED) -
YED measures demand sensitivity to income variations via YED = (%ΔQd) / (%ΔIncome). Positive YED signals a normal good, while negative YED indicates an inferior good - luxuries often have YED >1. Think "more income, more normal goods" to keep concepts straight.
Cross-Price Elasticity of Demand (XED) -
XED = (%ΔQd of Good A) / (%ΔP of Good B) gauges the link between two products; a positive XED means substitutes, a negative value means complements. For example, a 5% rise in burger prices boosting fries demand by 2% yields XED = +0.4. Use "same sign = substitutes, opposite = complements" as a handy guide.
Price Elasticity of Supply (PES) -
PES = (%ΔQs) / (%ΔP) tracks how quantity supplied reacts to price changes; higher PES suggests producers can ramp up output swiftly. Time horizon, production flexibility, and resource mobility are key determinants - think of farmers' slow crop adjustments versus tech firms' quick scale-ups. Check IRS and USDA research for real-world PES insights.
Midpoint (Arc) Elasticity Formula -
The midpoint method avoids base bias: Elasticity = [(Q2−Q1)/((Q2+Q1)/2)] ÷ [(P2−P1)/((P2+P1)/2)]. This approach yields consistent elasticity whether price rises or falls, making comparisons fairer. Practice with sample data to get comfortable using the "average of endpoints" trick.
