Chapter MCQ Test 2 — Elasticity of Demand
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
Price of a good falls from ₹50 to ₹40 and quantity demanded rises from 100 to 150. The elasticity is:
2.5
0.4
1
5
Explanation: %ΔQ = 50%, %ΔP = 20%; E = 50 ÷ 20 = 2.5 (elastic).
Question 2 of 10
A shopkeeper finds that cutting the price of a luxury watch raises his total sales revenue. The watch's demand is:
Elastic
Inelastic
Unit elastic
Perfectly inelastic
Explanation: Price down, total expenditure (revenue) up → opposite directions → elastic demand.
Question 3 of 10
When the price of life-saving medicine rises, patients buy almost the same amount. Its demand is:
Inelastic
Elastic
Perfectly elastic
Unit elastic
Explanation: A necessity with no substitute shows little response to price — inelastic demand.
Question 4 of 10
A 10% rise in price leaves a farmer's total spending on diesel almost unchanged. Diesel demand is closest to:
Unit elastic
Perfectly elastic
Perfectly inelastic
Highly elastic
Explanation: If total expenditure is roughly constant as price changes, elasticity is about 1 (unit elastic).
Question 5 of 10
Demand for a particular brand of soap is more elastic than demand for soap in general mainly because the brand has:
Many close substitutes (other brands)
No substitutes
A vertical curve
No price
Explanation: Rival brands are close substitutes, so buyers switch easily — making one brand's demand elastic.
Question 6 of 10
A good on which a household spends a very large share of its income tends to have demand that is:
More elastic
Perfectly inelastic
Always unit elastic
Unaffected by price
Explanation: When a good takes a big slice of income, price changes matter more, raising elasticity.
Question 7 of 10
Ignoring the negative sign of elasticity is acceptable because economists focus on the:
Size (degree) of responsiveness
Direction only
Total revenue only
Income
Explanation: The minus sign just reflects the inverse law of demand; the magnitude tells us how responsive demand is.
Question 8 of 10
If a 30% price cut causes only a 6% rise in quantity demanded, the demand is:
Inelastic (E = 0.2)
Elastic (E = 5)
Unit elastic
Perfectly elastic
Explanation: E = 6 ÷ 30 = 0.2, which is less than 1 — inelastic.
Question 9 of 10
Why is demand usually more elastic in the long run than in the short run?
Given time, consumers find and switch to substitutes
Prices never change
Income falls
Goods disappear
Explanation: Over time buyers adjust habits and discover alternatives, making demand more responsive.
Question 10 of 10
A monopolist deciding whether a price cut will raise revenue is really asking whether demand is:
Elastic (so total expenditure rises when price falls)
Perfectly inelastic
Vertical
Zero
Explanation: Revenue rises with a price cut only if demand is elastic, where total expenditure moves opposite to price.