Question

If the market fora product is broadly defined, then there are few substitutes for the product and the demand for the product is relatively inelastic. the expenditure on the good is likely to make up a large share of one's budget. there are many substitutes for the product and the demand for the product is relatively elastic. the good has many complements.

Answer 1

1) If the market for a product is broadly defined, then

- there are few substitutes for the product and the demand for the product is relatively inelastic.

option (A)

2) Percentage change in price = [20-16/(20+16/2)] = [4/18] = 22.22

E = 30/22.22 = 1.35

Option(A)

3) E = [30-20/(30+20/2)]/[40-50/(40+50/2)] = [10/25]/[10/45] = 0.4/0.22222 = 1.8

Option(C)

4) Farm revenues decrease as productivity increases, supply increases which decreases price and demand remains inelastic.

option(C)