Investment Management Certificate (IMC) Practice Exam

Which term describes how responsive the quantity demanded is to changes in marketing variables such as price and advertising?

1. Production

2. Elasticity

3. Profitability

4. Disinvesting

The correct answer is: Elasticity

The term that describes how responsive the quantity demanded is to changes in marketing variables such as price and advertising is elasticity. Elasticity is a key concept in economics that measures the sensitivity of consumers to changes in price or other factors that can influence buying behavior. When discussing price elasticity of demand, for instance, a high elasticity indicates that consumers significantly reduce their quantity demanded when prices rise, while a low elasticity suggests that changes in price have little effect on the quantity demanded. Similarly, advertising elasticity looks at how changes in advertising efforts can influence consumer demand. Understanding elasticity is crucial for businesses in setting pricing strategies and making decisions about advertising expenditures, as it can significantly affect revenue and market positioning. The other terms do not capture this responsiveness in the context of demand; they relate to different aspects of economics and financial management.