Question

Question No. 1 (20 MARKS)
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

Answer:

True

True

False

False

Explanation:

is it you ans

Answer 2

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

• False
• Cross elasticity of demand is said to be positive when the increase in the price of one commodity leads to an increase in the demand for another commodity. When two commodities are close substitutes to each other, cross elasticity will be positive.

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

• True
• The luxury goods are not essential for the existence and their consumption can be postponed or can be dispensed with. Thus, their demand changes by a large amount due to small changes in their price. So the demand for luxury goods is elastic i.e. elasticity of demand is greater than one.

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

• False
• Increasing the salary of journalists won't necessarily make people demand more newspapers i.e. they have Zero cross elasticity of demand.

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

• True
• In Elasticity of supply, the quantity supplied is relatively responsive to changes in price. The numerical value of the price elasticity will be greater than 1. Thus, anywhere on the supply curve, the elasticity is greater than unity, through the particular numerical value of the elasticity will vary along the curve which means that the supply curve is flatter.

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