Question : Statement 1: The demand for necessities is generally inelastic.
Statement 2: Necessities are essential goods with limited substitutes, making consumers less price-sensitive in their purchasing decisions.
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.
Correct Answer: Both statements are true.
Solution : The correct answer is (A) Both statements are true.
Statement 1: The demand for necessities is generally inelastic. This statement is true. Necessities are goods that are considered essential for daily living, such as food, water, housing, and healthcare. The demand for these goods tends to be less responsive to changes in price because they are deemed necessary and consumers are less likely to significantly reduce their consumption even if the price increases. Therefore, the demand for necessities is generally inelastic.
Statement 2: Necessities are essential goods with limited substitutes, making consumers less price-sensitive in their purchasing decisions. This statement is also true and supports the relationship described in statement 1. Necessities are often goods for which there are limited substitutes or alternatives available. As a result, consumers have fewer options to switch to if the price of a necessity increases. This limited availability of substitutes makes consumers less price-sensitive in their purchasing decisions, contributing to the inelastic demand for necessities.
Both statements accurately describe the characteristics of necessities and their impact on price sensitivity.
Question : Statement 1: If a good is a luxury, its demand is generally elastic.
Statement 2: Luxury goods tend to have more substitutes, making consumers more responsive to changes in price.
Question : Assertion: The demand for essential goods is generally inelastic.
Reason: Essential goods have limited substitutes, and consumers are less price-sensitive in their purchase decisions.
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.
Question : Statement 1: If the price elasticity of demand for a product is -0.2, demand is considered inelastic.
Statement 2: Inelastic demand implies that a change in price leads to a proportionately smaller change in quantity demanded.
Question : Statement 1: Price elasticity of demand can have a value of zero for a perfectly inelastic demand curve.
Statement 2: Perfectly inelastic demand implies that quantity demanded does not change regardless of price changes.
Question : Statement 1: Inferior goods have a negative income elasticity of demand.
Statement 2: When consumer income increases, the demand for inferior goods decreases.
Option 3: Statement 1 is true, and statement 2 is false
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