Question : Cross elasticity of demand measures the responsiveness of quantity demanded to changes in:
Option 1: Price of a substitute good.
Option 2: Price of a complementary good.
Option 3: Income.
Option 4: Both a) and b).
Correct Answer: Both a) and b).
Solution : The correct answer is (d) Both a) and b).
Cross elasticity of demand measures the degree to which the quantity demanded of one good changes in response to a change in the price of another good. It helps determine whether two goods are substitutes or complements.
If the cross elasticity of demand is positive, it indicates that the goods are substitutes, meaning that an increase in the price of one good leads to an increase in the quantity demanded of the other. If the cross elasticity of demand is negative, it indicates that the goods are complements, meaning that an increase in the price of one good leads to a decrease in the quantity demanded of the other.
Therefore, cross elasticity of demand captures the responsiveness of quantity demanded to changes in the prices of both substitute goods and complementary goods.
Question : Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to changes in the:
Option 1: Price of a complementary good
Option 2: Price of a substitute good
Option 3: Income of consumers
Option 4: Production cost of the good
Question : Which of the following is a characteristic of demand elasticity?
Option 1: It measures the responsiveness of quantity demanded to changes in price.
Option 2: It measures the responsiveness of quantity supplied to changes in price.
Option 3: It measures the responsiveness of demand to changes in income.
Option 4: It measures the responsiveness of demand to changes in the cost of production.
Question : Income elasticity of demand measures the responsiveness of quantity demanded to changes in:
Option 1: Price.
Option 2: Income.
Option 3: Population.
Option 4: Advertising expenditure.
Question : Statement 1: Cross elasticity of demand measures the responsiveness of quantity demanded of one good to changes in the price of another good.
Statement 2: Positive cross elasticity of demand indicates that two goods are substitutes.
Option 1: Both statements are true.
Option 2: Both statements are false.
Option 3: Statement 1 is true, and statement 2 is false.
Option 4: Statement 1 is false, and statement 2 is true.
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile