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Question
- Luxuries goods have generally elastic demand.
- Goods whose close substitutes are available have inelastic demand.
Options
Statement (i) is false and statement (ii) is true
Statement (i) is true and statement (ii) is false
Both (i) and (ii) are false
Both (i) and (ii) are true
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Solution
Statement (i) is true and statement (ii) is false
Explanation:
- Statement (i) is true because luxury goods generally have elastic demand, meaning that a change in price leads to a relatively larger change in the quantity demanded.
- Statement (ii) is false because goods with close substitutes typically have elastic demand, as consumers can easily switch to a substitute if the price of the good increases.
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RELATED QUESTIONS
Explain the factors determining the elasticity of demand.
A consumer spends Rs 1000 on a good priced at Rs 8 per unit. When price rises by 25 percent, the consumer continues to spend Rs 1000 on the good. Calculate the price elasticity of demand by percentage method.
A consumer spends Rs 1,000 on a good priced at Rs10 per unit. When its price falls by 20 percent, the consumer spends Rs800 on the good. Calculate the price elasticity of demand by the Percentage method
Write a short note on factors determining elasticity of demand.
State whether the following statement isTrue or False with reason:
The concept of elasticity of demand is useful in economic theory.
Fill in the blank with appropriate alternatives given below:
Income elasticity of demand for inferior goods is __________.
Give reason or explain the following statement:
Demand for commodity having multiple uses has elastic demand.
Assertion (A): The elastic demand curve for luxuries is flatter than normal.
Reason (R): The coefficient of Elasticity ranges between 0 and 1.
Identify the correctly matched pair from the items in Column A by matching them to the items in Column B:
| Column A | Column B | ||
| 1 | Relatively Inelastic Demand | (a) | ed > 1 |
| 2 | Relatively Elastic Demand | (b) | ed < 1 |
| 3 | Perfectly Inelastic Demand | (c) | ed = 0 |
| 4 | Perfectly Elastic Demand | (d) | ed = 1 |
Assertion (A) : A change in quantity demanded of one commodity due to a change in the price of other commodity is cross elasticity.
Reasoning (R) : Changes in consumers income leads to a change in the quantity demanded.
