Answer to Question #230540 in Microeconomics for zehra

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.

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

Answer 1

Answers

a) False

Explanation

If the cross elasticity of demand for substitute is positive, then the substitute is also positive.

b) True

Explanation

A positive elasticity demand usually associates with common/normal goods. An increase in income results to increase in quality of goods demand. If elasticity income demand of a product is less than one, then it is a necessary good, but if is greater than one, then it is a luxury good.

c) False

Explanation

The demand for the newspapers is expected to shift on the left (demand will go down)

d). True

Explanation

When the supply is greater than one, it means that there is a high responsiveness after a chance in price of a commodity.