Question

If product X is a necessity, and for product Y there are no close substitutes, then ceteris paribus, we should expect the price elasticities of demand for X and Y to be relatively

A) elastic and inelastic, respectively.

B) inelastic and elastic, respectively.

C) elastic and elastic, respectively.

D) inelastic and inelastic, respectively.

If a good is considered to be an normal good, its income elasticity of demand will be

A) less than -1.

B) equal to -1

C) between 0 and -1.

D) more than 0.

Answer 1

Q1
Answer
Option D
D) inelastic and inelastic, respectively.
A demand for necessity is inelastic as it cannot be postponed and also it is required at any cost almost.
Demand for no close substitute good is inelastic because there is no option or substitute for the good and now or later needed to purchase the good from the same place or same producer because there is no close substitute

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Q2
ANswer
Option D
A normal good demand increases as income increases which are a positive relationship and that is shown by the income elasticity of it so that the income elasticity of normal good should be positive
Negative income elasticity of a good indicates that the good is inferior and decreases demand as income increases.