MCQs – Second Mid Semester
1. The formula for calculating elasticity of demand is:
A. The % change in price over the % change in quantity demanded
B. The % change in quantity demanded over the % change in price
C. The change in price over the change in quantity demanded
D. The change in quantity demanded over the change in price
2. The elasticity of demand for tissues is 0.66. This means the demand for tissues is
A. elastic
B. unit elastic
C. inelastic
D. really expensive
3. Which of these best describes the law of demand?
A. if prices go up, quantity demanded will fall and if prices go down, quantity
demanded will go up
B. if prices go up, quantity demanded will also go up and if prices go down, quantity
demanded will also go down
C. there is no law of demand, each situation is unique and demand and prices cannot
be predicted
D. prices will go up for certain goods when quantity demanded goes up and vice
versa
4. Elasticity refers to
A. how producers of goods and services react to price changes
B. how consumers of goods and services react to price changes
C. how far a supply of scarce goods can be stretched
D. how often the price of a good or service changes when quantity
5. Water has seen an increase in demand 8% this summer, while the price has
decreased 12%
A. 1.5 inelastic
B. 1.5 elastic
C. 0.67 inelastic
D. 0.67 elastic
6. Price elasticity of demand measures
A. The responsiveness of price to a change in demand
B. The responsiveness of demand to a change in income
C. The responsiveness of demand to a change in price
D. The responsiveness of demand to a change in supply
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7. Inelastic demand curves are illustrated as
A. Flat
B. Horizontal
C. Positively sloped
D. Steep
8. Goods with elastic demand are likely to
A. Have lots of close substitutes
B. Be addictive in nature
C. Take up a small proportion of a consumer's regular spending
D. Have a high degree of customer loyalty
9. Dame Allan's is about to raise school fees by 10% The most elastic demand
response is likely to come from the parents of pupils going into
A. Year 7
B. Year 10
C. Year 11
D. Year 13
10. A business that is about to have a sale will hope that consumer demand is
A. Exceptional
B. Normal
C. Price elastic
D. Price inelastic
11. A firm can increase its revenue by raising its price if
A. Demand is price inelastic
B. Demand is price elastic
C. There are a large number of close substitutes
D. The degree of brand loyalty is low
12. The demand for petrol is likely to become more price elastic
A. If electric cars become more expensive
B. As electric cars become cheaper
C. As consumers become more aware of climate threats
D. If public transport becomes more reliable
13. How could a business try to find out its own price elasticity of demand?
A. Carry out surveys for customer satisfaction
B. Change workers wage rates and record the effect on productivity
C. Increase advertising spending on its products
D. Change prices regularly and record the effect on sales levels
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14. Good weather results in an increase in the demand for tomatoes. It also increases
the supply of tomatoes. What must be a result of this?
A. The price of tomatoes will fall.
B. The price of tomatoes will rise.
C. The quantity of tomatoes traded will fall.
D. The quantity of tomatoes traded will rise.
15. The owner of a hotel in Malaysia finds that the price elasticity of demand (PED) for
accommodation in the area is –1.7. If the hotel owner decreases the price of a room by
5%, how would the demand for a room change?
A. It would decrease by 2.9%.
B. It would decrease by 8.5%.
C. It would increase by 2.9%.
D. It would increase by 8.5%.
16. What is the value of the price elasticity of demand (PED) for a product if total revenue
remains the same when the price is reduced?
A. zero
B. between 0 and 1
C. Greater than 1
D. 1
17. 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
18. Tea is a very popular drink in Turkey and Morocco but coffee is an alternative drink
preferred by many people. Many cafés provide a small biscuit with either a cup of tea or
coffee. Some people put sugar in the drinks to sweeten them.
How would the relation between these goods be classified? Answer - C
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19. The diagram shows the supply curve for a good.
What is the price elasticity of supply when the price rises from $2 to $4?
A 0.2
B 0.5
C1
D2
20. The table shows the quantity that producers are willing to supply at different price
levels.
If the price increases from $120 to $180, what would be the price elasticity of supply?
A 0.16
B4
C6
D 60
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