Concept of Elasticity And Its Application - SS2 Economics Past Questions and Answers - page 1
What does elasticity measure?
The number of resources available in an economy.
The total amount of economic activity in an economy.
The amount of government regulation in an economy.
The responsiveness of one economic variable to changes in another economic variable.
What is the price elasticity of demand?
The responsiveness of quantity supplied to changes in price.
The responsiveness of quantity demanded to changes in price.
The responsiveness of quantity demanded to changes in income.
The responsiveness of quantity demanded of one good to changes in the price of another good.
Why is elasticity important in economics?
It helps us understand how changes in one economic variable affect other economic variables.
It helps us measure the total amount of economic activity in an economy.
It helps us determine the amount of government regulation in an economy.
It helps us calculate the number of resources available in an economy.
How does elasticity affect pricing decisions for firms?
If the elasticity of demand for a product is low, firms may choose to increase prices to increase demand.
If the elasticity of demand for a product is high, firms may choose to keep prices low to increase demand.
Elasticity has no effect on pricing decisions for firms.
Firms always choose to keep prices high to increase profits.
How is elasticity used to help allocate resources in an economy?
If the elasticity of demand for a certain type of labor is high, firms may be more willing to hire workers with that skill set.
Elasticity has no effect on resource allocation in an economy.
If the elasticity of demand for a certain type of labour is low, firms may be less willing to hire workers with that skill set
If the elasticity of demand for a certain type of labour is high, firms may be less willing to hire workers with that skill set.
How can elasticity be used to help governments make taxation decisions?
Governments can use elasticity to determine the likely impact of a tax on a product. If the elasticity of demand for a product is high, a tax on that product could significantly reduce demand and discourage consumers from purchasing the product.
Why is the price elasticity of demand an important concept for firms?
The price elasticity of demand is important for firms because it helps them make pricing decisions. If the elasticity of demand for a product is high, a small increase in price will lead to a large decrease in demand. Therefore, firms may choose to keep prices low in order to increase demand and maximize profits.