Answer to Question #230574 in Microeconomics for Minal

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 elasticity is positive, then it means the price elasticy is elastic and thus there are close substitutes.

b) True, luxury goods are high elastic and thus their price elasticity must be greater than 1.

c) False, if the salaries for of journalist go up then it will increase the cost of producing newspaper making the supply to be less and thus increase the cost of newspaper making it to be less demanded and shift demand curve to the left.

d) True, if the price elasticity of supply, the supply curve is upward sloping and somehow flatter.