Question

If firms have to change their production techniques in order to change the quantities they supply, their response to a price change will be less in a period of a year as compared to what they can do in a month.

True

False

When the cross-price elasticity of demand for two goods is a positive number, one can correctly conclude that:

the goods are inferior goods.

the goods are complements.

the goods are substitutes.

the goods are normal goods.

total revenue will increase when the price increases.

When the elasticity of demand for a particular good is between zero and -1, _____.

demand is inelastic

the good is an inferior good

demand is unit-elastic

demand is elastic

the good is a normal good

Demand for a good becomes more elastic as:

the time period under consideration becomes shorter.

a good makes up a larger percentage of a consumer’s budget.

a good makes up a smaller percentage of a consumer’s budget.

the producer has more time to respond to price changes.

the number of substitutes available declines.

Answer 1

1. True

Long term results usually tend to be near to the previous equilibrium.

2. The goods are substitute

The cross price elasticity of demand for close substitutes is positive.

3. Demand is inelastic

Doesn't change very readily with change in price of the given commodity

4.

a good makes up a smaller percentage of a consumer’s budget

Then it becomes easier for the consumer to stop consuming it.