Price Elasticity of Demand (PED) MCQs

econstudy |

October 16, 2022

10 Questions

Page 1 of 10

A mobile (cell) phone operator increases the price of making calls on its network. After the price increase, the revenue of the mobile phone operator falls by 10%. What is the price elasticity of demand (PED) for the mobile operator's service? A. Elastic B. Inelastic C. Perfectly elastic D. Unit elastic

Page 2 of 10

Which of the following goods is likely to have an inelastic demand? A. Ice cream B. Cigarettes C. Diamonds D. Movie tickets

Page 3 of 10

How might the concept of price elasticity of demand (PED) be useful for a government? A. To determine the effect on employment of a change in income tax B. To determine the effect on government revenue of a rise in the rate of interest C. To determine the effect of providing a public good D. To determine the result of imposing a tariff on imports

Page 4 of 10

The price elasticity of demand (PED) for bottled water is –0.9. What will happen to the quantity demanded for bottled water if its price increases by 10%? A. Decrease by 0.9% B. Decrease by 9% C. Increase by 0.9% D. Increase by 9%

Page 5 of 10

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

Page 6 of 10

The demand for a product is said to be _______________________ if the sales revenue remains the same when the profit margin on the product is reduced. A. Price elastic B. Price inelastic C. Unit elastic D. Income elastic

Page 7 of 10

Statement I: On every point along a diagonal straight-line demand curve, the PED is constant. Statement II: When a product has a perfectly elastic demand curve, an increase in price will cause an infinite change in quantity demanded. A. Statement I and II are both true B. Statement I is true and statement II is false C. Statement I and II are both false D. Statement I is false and statement II is true

Page 8 of 10

A product has a price elasticity of demand that is greater than one. What will happen to total revenue if the price of the product is reduced by 3%? A. It will fall by more than 3% B. It will fall to zero C. It will be unchanged D. It will rise

Page 9 of 10

A football club raises all stadium seat prices by 5%. The stadium is divided into four zones. The demand for seats falls by 1% in zone W, by 3% in zone X, by 5% in zone Y and by 6% in zone Z. In which zone is the responsiveness of demand for seats to the price change elastic? A. Zone W B. Zone X C. Zone Y D. Zone Z

Page 10 of 10

A company decided to reduce the price of its product by 10%. What would happen? A. The firm’s costs would decrease if the elasticity of demand was greater than one B. The firm’s profits would increase if the elasticity of demand was greater than one C. The firm’s revenue would increase if the elasticity of demand was greater than one D. The quantity sold would decrease if the elasticity of demand was less than one

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Price Elasticity of Demand (PED) MCQs

10 Questions

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