Test: Elasticity of Demand - Class 10 MCQ

Demand is classified as inelastic when the price elasticity of demand is less than 1. This means that a change in price results in a smaller change in the quantity demanded, indicating that consumers are less responsive to price changes.

Perfectly elastic demand appears as a horizontal line on a graph. This indicates that even a small change in price leads to an infinite change in quantity demanded, showcasing extreme sensitivity to price changes.

A price elasticity of demand greater than 1 indicates elastic demand, meaning that consumers are highly responsive to price changes. This implies that a percentage change in price leads to a larger percentage change in the quantity demanded.

The correct formula for calculating price elasticity of demand is ed = Percentage change in quantity demanded / Percentage change in price. This formula provides a measure of how demand responds to price changes, indicating consumer sensitivity.

Income elasticity of demand measures how the quantity demanded of a good changes in response to variations in consumer income. This reflects whether goods are normal (demand increases with income) or inferior (demand decreases with income).

A vertical demand curve represents perfectly inelastic demand. In this scenario, the quantity demanded remains constant regardless of price changes, indicating that consumers will purchase the same amount regardless of cost.

Perfectly elastic demand is defined as a situation where a small change in price leads to an infinite change in quantity demanded. This indicates extreme sensitivity, often seen in highly competitive markets where substitutes are readily available.

The geometric method, also known as the point method, assesses elasticity at specific points along the demand curve. This allows for a more precise measurement of elasticity variations at different price and quantity levels, unlike average measures.

Price elasticity of demand measures how sensitive the quantity demanded of a good is to changes in its price. A higher elasticity indicates that demand significantly changes with price fluctuations, while a lower elasticity suggests that demand is relatively stable despite price changes.

Perfectly inelastic demand occurs when the quantity demanded does not change regardless of price changes, resulting in a price elasticity of demand equal to zero. This scenario is typically seen with essential goods that consumers will buy regardless of price.

Inelastic demand is characterized by little change in quantity demanded despite significant price changes. This scenario reflects consumer behavior for essential goods, where price increases do not significantly deter purchases.

Total market size does not directly influence demand elasticity. Instead, factors such as the availability of substitutes, consumer income, and the time period for adjustment play significant roles in determining how responsive demand is to price changes.

Cross elasticity of demand measures how the quantity demanded of one good changes in response to a change in the price of another related good. This concept is essential for understanding the relationships between substitute and complementary goods.

When demand is unit elastic, a change in price does not affect total expenditure. This occurs because the percentage change in quantity demanded is exactly equal to the percentage change in price, leading to no net change in revenue.

If an increase in the price of good Y results in a decrease in the quantity demanded of good X, it indicates that the two goods are complements. This means that as the price of one good rises, the demand for the related good falls because they are often used together.

Elasticity is crucial in devaluation policy because it helps predict how demand for exports and imports will change in response to currency fluctuations. Understanding elasticity allows policymakers to anticipate economic impacts and make informed decisions.

When demand is less than unitary elastic, total expenditure decreases when the price increases. This is because the percentage change in quantity demanded is smaller than the percentage change in price, leading to a reduction in overall revenue.

If a decrease in price results in an increase in total expenditure, it indicates that demand is greater than unitary elastic. This means that consumers are significantly responsive to price changes, resulting in a larger quantity demanded.

The Total Expenditure Method is one of the three primary methods used to measure price elasticity of demand. It analyzes how total expenditure changes with price variations, providing insights into consumer behavior related to price changes.

Understanding elasticity in wage bargaining is crucial because it helps negotiators assess how the demand for labor changes with wage variations. If demand is elastic, small changes in wages can significantly affect hiring decisions.