Question : Statement 1: When the price of a complementary good increases, the demand for the main good decreases.
Statement 2: Complementary goods are consumed together, and an increase in the price of one reduces the affordability and demand for the other.
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: When the price of a complementary good increases, the demand for the main good decreases. This statement is true. Complementary goods are goods that are consumed together or used in conjunction with each other. When the price of a complementary good increases, it reduces the affordability or attractiveness of using that complementary good, which in turn reduces the demand for the main good. For example, if the price of coffee (complementary good) increases, it may lead to a decrease in the demand for coffee filters (main good).
Statement 2: Complementary goods are consumed together, and an increase in the price of one reduces the affordability and demand for the other. This statement is also true and supports the relationship described in statement 1. When the price of a complementary good increases, it reduces the affordability of consuming both goods together. As a result, consumers may choose to reduce or adjust their consumption of the main good, leading to a decrease in demand.
Both statements accurately describe the relationship between complementary goods, price changes, and the impact on demand.
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
Question : Statement 1: If the price of a good increases, and its total revenue decreases, demand for that good is elastic.
Statement 2: Elastic demand implies that an increase in price leads to a proportionately larger decrease in quantity demanded, resulting in lower total revenue.
Question : Statement 1: When the price of a product increases by 10%, and its quantity demanded decreases by 5%, the price elasticity of demand is - 0.5.
Statement 2: The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.
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.
Question : Statement 1: The price elasticity of demand for a normal good is always negative.
Statement 2: Normal goods exhibit an inverse relationship between price and quantity demanded.
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