Question

Taking the absolute value of the cross-price elasticity of demand is incorrect because it would:

	remove the ability to tell whether the two products have inelastic demand or elastic demand.
	cause the value of the cross-price elasticity of demand to become smaller.
	remove the ability to tell whether the two products are substitutes or complements.
	cause the value of the cross-price elasticity of demand to become zero.

The percent change in insulin demanded for any price change is zero. The demand curve for insulin is _____, and the price elasticity of demand is _____.

	vertical; perfectly elastic
	vertical; perfectly inelastic
	horizontal; perfectly elastic
	horizontal; perfectly inelastic

You are given some data for four different products — milk, eggs, beef, and orange juice. The absolute value of the price elasticity of demand for beef is 0.9. The absolute value of the price elasticity of demand for orange juice is 3.5. The cross price elasticity between eggs and milk is -1. Which product has the most inelastic demand?

	milk
	eggs
	beef
	orange juice

Answer 1

Ques 1 Part C remove the ability to tell whether the two products are substitutes or complements.

To tell if the products are substitutes or complements, we need to assess the sale or demand pattern of the 2 good. When sign is not available, the ability to understand this relationship gets hampered.

Ques 2 Part B vertical; perfectly inelastic

The perfectly inelastic good has a vertical line. The product does not respond much to changes in price

Ques 3 Part C Beef

Since the elasticity of beef is less than 1 when we see the absolute value of elasticity, we can say that beef is most inelastic

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