Elasticity of Demand Quiz - ICSE Class 12 Economics
Free practice quiz: Elasticity of Demand (ICSE Class 12 Economics). 52 multiple-choice questions with answers and explanations. Play online, no sign-up needed.
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When the price of a good decreases by 10%, the quantity demanded increases by 20%. What is the price elasticity of demand for this good?
- -0.5
- -2
- 2
- 0.5
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Answer: B. -2
Price Elasticity of Demand (PED) = (% Change in Quantity Demanded) / (% Change in Price). Here, % Change in Qd = 20% and % Change in P = -10%. So, PED = 20% / -10% = -2. The negative sign indicates the inverse relationship between price and quantity demanded.
A government imposes a tax on a product. The burden of the tax will fall more heavily on the consumers if the demand is:
- Elastic and supply is inelastic
- Inelastic and supply is elastic
- Elastic and supply is elastic
- Inelastic and supply is inelastic
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Answer: B. Inelastic and supply is elastic
The incidence of a tax (who bears the burden) depends on the relative elasticities of demand and supply. The side of the market with the less elastic (more inelastic) curve will bear a larger portion of the tax burden. If demand is inelastic and supply is elastic, consumers (demand side) will bear more of the tax.
The elasticity of supply measures the responsiveness of the quantity supplied of a good to a change in its:
- Consumer income
- Price of the good
- Price of related goods
- Consumer tastes
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Answer: B. Price of the good
Elasticity of supply (PES) is defined as the percentage change in quantity supplied in response to a one percent change in the price of the good, holding other factors constant.
If the price of a good increases from $10 to $15, and the quantity demanded falls from 100 to 80 units, what is the point elasticity of demand at P=$10?
- -0.4
- -0.5
- -0.8
- -0.6
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Answer: A. -0.4
To calculate point elasticity, we need the slope of the demand curve. Assuming a linear demand curve, the slope (ΔP/ΔQ) = (15-10)/(80-100) = 5/-20 = -1/4. Point Elasticity = (P/Q) * (1/Slope) = (10/100) * (1/(-1/4)) = (1/10) * (-4) = -0.4.
If the price elasticity of demand for a product is -2.5, a $1 increase in price for a product originally priced at $10 will result in:
- A 25% decrease in quantity demanded
- A 25% increase in quantity demanded
- A 10% decrease in quantity demanded
- A 10% increase in quantity demanded
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Answer: A. A 25% decrease in quantity demanded
The price elasticity of demand (PED) is -2.5. The percentage change in price is not explicitly given as a percentage, but rather a $1 increase from $10. The percentage change in price is ($1/$10) * 100% = 10%. PED = (% Change in Quantity Demanded) / (% Change in Price). Therefore, % Change in Quantity Demanded = PED * (% Change in Price) = -2.5 * 10% = -25%. This represents a 25% decrease in quantity demanded.