Question

1. A perfectly inelastic supply curve is (1 mark)

1. diagonal
2. vertical
3. horizontal
4. NONE of the above

2. The cross-price elasticity of demand for two goods that are complements is (1 mark)

1. zero.
2. negative.
3. positive.
4. infinite.

Answer 1

1. Option B.

When the supply is perfectly inelastic in nature, then it will be vertical in nature.

This is because, even if the price changes slightly the quantity supplied will not change even by a small amount.

2. Option B.

The cross price elasticity of complementary goods are negative.

Complementary goods are those goods in which the demand of one good decreases when the price of another good Increases and vice versa.

Hence their cross price elasticity is considered as negative as both the price and demand of each goods are negatively related to each other.