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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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