Elasticity Of Demand - SS1 Economics Past Questions & Answers - page 1

1

What is the formula for the elasticity of demand?

A

Percentage change in quantity demanded divided by percentage change in price

B

Percentage change in price divided by percentage change in quantity demanded

C

 Price times quantity demanded

D

Quantity demanded divided by price

CORRECT OPTION: a
2

Which of the following goods is likely to have an elastic demand?

A

Gasoline

B

Prescription medications

C

Luxury cars

D

Housing

CORRECT OPTION: a
3

When demand is perfectly inelastic, a change in price will result in:

A

 No change in quantity demanded

B

A small change in quantity demanded

C

A large change in quantity demanded

D

A decrease in the price of the good

CORRECT OPTION: b
4

What is the difference between elastic and inelastic demand?

Elastic demand refers to a situation where a small change in price leads to a relatively larger change in the quantity demanded. On the other hand, inelastic demand refers to a situation where a change in price results in a relatively smaller change in the quantity demanded.

5

Discuss three factors that affect the elasticity of demand.

Three factors that affect the elasticity of demand include:

  • The necessity of the product: If a product is considered a necessity, consumers may continue to purchase it even if the price increases, making the demand for the product more inelastic.

  • Income of consumers: When consumers have a higher income, they may be less sensitive to price changes, making the demand for the product more inelastic.

  • Time: The longer the time period consumers have to adjust to a change in price, the more elastic the demand becomes, as they have more time to search for substitutes or adjust their consumption patterns.

 

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