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
Correct Answer: Price of a substitute good
Solution : The correct answer is (b) Price of a substitute good
Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to changes in the price of a substitute good. It helps us understand how the demand for a particular good is affected by changes in the price of another good that can be used as a substitute. A positive cross elasticity of demand indicates that the goods are substitutes, meaning that an increase in the price of one good leads to an increase in the demand for the other. Conversely, a negative cross elasticity of demand indicates that the goods are complements, meaning that an increase in the price of one good leads to a decrease in the demand for the other.
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).
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 : Assertion: Cross elasticity of demand measures the responsiveness of quantity demanded of one good to changes in the price of another good.
Reason: Cross elasticity of demand is calculated as the percentage change in quantity demanded of one good divided by the percentage change in the price of another good.
Option 1: Both the assertion and reason are correct and related.
Option 2: Both the assertion and reason are correct but not related.
Option 3: The assertion is correct, but the reason is incorrect.
Option 4: The assertion is incorrect, but the reason is correct.
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