Tag: A-Level

The price of a product is likely to be lower if?

Select ONE answer:

1. Demand is price inelastic
2. There is limited competition
3. It is in a niche market
4. The product has a USP
5. Entry into the market is easy

Explain and justify your answer:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 5 – If entry into a market is easy then competitors can come in because there are lower barriers to entry and charge a price lower than the incumbents and capture market share which will require a matching action from the incumbents to maintain their market share.

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If revenue falls after a price increase, the price elasticity of demand is?

Select ONE answer:

1. Zero
2. 1
3. Less than 1
4. More than 1
5. Positive

What is the value of the price elasticity of demand is price inelastic:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 4 – If PED > 1, then demand responds more than proportionately to a change in price i.e. demand is elastic. For example, if a 10% increase in the price of a good leads to a 30% drop in demand. The price elasticity of demand for this price change is –3

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An increase in the price of 10% has led to a fall in sales of 20%.

The price elasticity of demand is?

Select ONE answer:

1. -2
2. +2
3. -0.2
4. -0.5
5. +0.5

Is this price elastic or price in-elastic and why:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 1 – The formula for calculating the price elasticity of demand is: Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price. If a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic (or responsive to price changes). Here PED = % change in QD of -20% / % change in P of 10% or -2.

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If demand is income elastic then?

Select ONE answer:

1. A change in income leads to a bigger change in quantity demanded (in percentages)
2. A change in price leads to a bigger change in quantity demanded (in percentages)
3. An increase in income increases the quantity demanded
4. An increase in income decreases the quantity demanded
5. A fall in income decreases the quantity demanded

What is the value of the income elasticity if the demand is income elastic:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 3 – A positive income elasticity of demand is associated with normal goods; an increase in income will lead to a rise in demand. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good.

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If the Price elasticity of demand is -0.5, then a 10% INCREASE in price will?

Select ONE answer:

1. Increase in sales by 20%
2. Decrease in sales by 20%
3. Increase in sales by 5%
4. Decrease in sales by 5%
5. Leaves sales unchanged

How can price elasticity of demand be estimated:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 4 – The formula for calculating the price elasticity of demand is: Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price. Therefore with PED = -0.5 then an increase in price will decrease sales -0.5 * 10% by 5%.

This work is licensed under a Creative Commons Attribution 4.0 International License.