Answer to Question #230472 in Microeconomics for Shayan

Question

State whether the Statement is TRUE or FALSE. Also write the reason (Without reason your answer will not accepted)

a) If value of cross price elasticity is positive then it means there are less close substitutes are available of that product.

b) In case of luxury products, the own price elasticity of demand is greater than one.

c) If salaries of journalist go up then demand curve of newspaper will shift upward.

d) When price elasticity of supply is greater than one it means supply curve is flatter.

Answer 1

(a)false

if the value of cross-price elasticity of demand is positive, it implies that the goods are more close substitutes.

(b)True

For a luxury product, the own-price elastic will be grater than 1 because the price elasticity of demand is elastic.

(c)False

If the salaries of the journalists increase, it will increase the cost of production that will decrease the supply of newspapers and increase the market price level. As a result, the quantity demanded will decrease the shift of the demand curve to the left or downward.

(d)False

If the price elasticity of supply is greater than 1, it implies high elasticity meaning supply will change largely with price changes.