Question

Question 1 (1 point) If two goods, X and Y, have a negative cross elasticity of demand, then we know that they are substitutes are both normal goods. are both inferior goods. each have a price elasticity greater than one. are complements. Next Page Page 1 of 20 Previous Page

Answer 1

Q1) option E)

Complements

As negative cross price elasticity imply that as price of related good rise , quantity demanded of the good in consideration will fall.

Hence two goods are jointly consumed, & hence complements

Q2) option A)

As tax revenue = tax* output

= 3*95

= 285

Q3) option b)

Zero,

As e = %∆in Q/%∆ in P

So as vertical curve has slope = infinity.

Then dQ/dP = zero , hence e = zero

Q4) option C)

If cross price elasticity is positive, then as price of the other good rise, & the quantity of the good ( in consideration) will rise

So as domestic & imported goods are substitutes, then as price of imported good falls, domestic good demand will fall & imported good demand will rise

Q5) option b)

As elasticity of demand = %∆ in Q/%∆ in P

So if e= 0, then %∆ in Q = 0

So quantity supplied is fixed, hence supply curve is vertical