Question

Please answer if the following questions are True or False:

Perfect compliments will have cross elasticities equal to -1.

A Giffen goods is an inferior goods whose negative income effect outweighs the positive substitution effect when the price of the goods decreases.

Intersecting indifference curves violates the completeness assumption of rational choice.

Answer 1

False because perfect complements have no substitution effect so the cross price elasticity is either infinity or zero.

True because a Giffen good has income effect that dominates the substitution effect and that an increase in income causes the quantity demanded to decline implying that the income effect is negative and stronger than positive substitution effect.

False. When two indifference curves intersects, the assumption of transitivity is violated because two different bundles on two different indifference curves should not provide the same utility.