Answer to Question #230676 in Microeconomics for Fardeen khan

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

Availability of a large number of close substitutes increases the cross-Price Elasticity of Demand.

B- True

The elasticity of demand for luxury goods is more than one since the proportionate change of the quantity demanded of luxury goods is more than the proportionate change in price of luxury good.

C-False

The increase in the salaries of the journalists will increase the cost of producing newspapers. This will reduce the market supply and shift the curve to the left. The leftward shift in the curve will increase the price of newspapers and the quantity demanded will reduce in the market as a result.

D-True

The product with high elasticity of demand, the downward-sloping demand curve appears flatter.