Question

The demand for a good is more price inelastic if a. it has no close substitutes....

The demand for a good is more price inelastic if

a. it has no close substitutes.

b.its price is higher.

c the percentage of income spent on it is larger.

d. it is a luxury good.

2. Free riding

a. occurs when consumers pay too much for services provided by government.

b. is possible if the consumption of a good is characterized by nonexcludability.

c. is characteristic of private goods.

d. is possible if the consumption of a good is characterized by excludability.

d. it is a luxury good.

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Homework Answers

Answer #1

The correct answer is 'Option A'.

If the good has no close substitutes available then the consumers will consume only that good which will make the demand of that good price inelastic. The percentage change in quantity demanded will be less than the percentage change in price. So, the correct answer is 'Option A'.

The correct answer is 'Option B'.

When the good is non-excludable in consumption then nobody can be excluded from having access to that good. This leads to the problem of free riding. The people who do not pay for the product also enjoy the benefits of that good. Therefore, the correct answer is 'Option B'.

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