Test Your Knowledge: Demand, Price, & Sales Impact Quiz

📚 Quick Study Guide

• 📈 Demand: The quantity of a product or service that buyers are willing and able to purchase at a given price.
• 💸 Price Elasticity of Demand (PED): Measures how much the quantity demanded of a good changes in response to a change in its price. $PED = \frac{\% \ Change \ in \ Quantity \ Demanded}{\% \ Change \ in \ Price}$
• ⚖️ Equilibrium Price: The price at which the quantity demanded equals the quantity supplied.
• 🛒 Factors Affecting Demand: Income, tastes, prices of related goods (substitutes and complements), expectations, and number of buyers.
• 📉 Law of Demand: As price increases, quantity demanded decreases (inverse relationship), *ceteris paribus*.
• 📊 Total Revenue: The total amount of money a firm receives from selling its product. Calculated as $Total \ Revenue = Price \times Quantity$
• 💡 Price Ceiling: A maximum legal price set by the government, which can lead to shortages if set below the equilibrium price.

🧪 Practice Quiz

1. Which of the following best describes the law of demand?
   1. A. As price increases, quantity demanded increases.
   2. B. As price increases, quantity demanded decreases.
   3. C. As income increases, quantity demanded decreases.
   4. D. As price remains constant, quantity demanded increases.
2. What does Price Elasticity of Demand (PED) measure?
   1. A. The change in price due to a change in income.
   2. B. The change in quantity supplied due to a change in price.
   3. C. The responsiveness of quantity demanded to a change in price.
   4. D. The responsiveness of quantity supplied to a change in income.
3. If the price of a product increases from $10 to $12 and the quantity demanded decreases from 100 units to 80 units, what is the Price Elasticity of Demand (PED) using the midpoint method?
   1. A. -0.82
   2. B. -1.22
   3. C. -1.00
   4. D. -0.50
4. What is the equilibrium price?
   1. A. The price at which quantity demanded exceeds quantity supplied.
   2. B. The price at which quantity supplied exceeds quantity demanded.
   3. C. The price at which quantity demanded equals quantity supplied.
   4. D. The average price in the market.
5. Which of the following is NOT a factor affecting demand?
   1. A. Income
   2. B. Tastes
   3. C. Technology
   4. D. Prices of related goods
6. What happens to total revenue if demand is elastic and price decreases?
   1. A. Total revenue increases.
   2. B. Total revenue decreases.
   3. C. Total revenue remains constant.
   4. D. Total revenue becomes zero.
7. What is a price ceiling?
   1. A. A minimum legal price set by the government.
   2. B. A maximum legal price set by the government.
   3. C. The equilibrium price in the market.
   4. D. The average price in the market.