Question

9- If the indifference curve shows the level of of an individual: true or false

10- The response or sustituvity of consumers to a change in the price of a product is known as the price elasticity of demand: true or false

11- If the price elasticity of demand coefficient is greather than one, it is said that demand is ineslatic: true or false

13- Income elasticity if the reaction or sensitivity of the consumer to the quantity demanded of a good or service when the price changes in a given period: true or false

14- Cross elasticity analyzes the quantity demanded of a good with the price of another good or service when given period: true or false

15- If the coefficient or cross elasticity is negative, the goods are complementary: true or false

16- If the income elasticity is equal to 1.23 it is a said to be a complementary good: true or false

17- An elastic demand refers to the fact that6 a small change in income generater a greater change in the quantity demanded: true or false

18- If the value of the correlation coefficient is close to one, the relationship between the variable is said to be weak: true or false

Answer 1

9. The Indifference Curve shows all the combinations of two goods that provide equal satisfaction as utility to a consumer. As the name suggests the consumer chooses various combinations of two goods among which he is indifferent. Indifference Curves are a part of Ordinal Utility due to which two combinations can be ordered as per its prefernce, but one cannot precisely suggest what exact level of utility is derived by consumer from each set of combination.

10. TRUE. Price Elasticity of Demand shows us the responsiveness or the percentage change in quantity demanded by consumer when the price of a good has been increased by 1%. The statement mentioned in the question is coherent with this and hence it is True.

11. FALSE. The correct statement will be that if the price elasticity of demand coefficient is greather than one, it is said that demand is Elastic. The price elasticity of demand is explained by the following formula:

Price Elasticity of Demand (Ed) = Percentage Change In Quantity Demanded / Percentage Change In Price

So as per Question If Ed is greater than 1 that implies that 1% Increase in Quantity Demanded causes a more than 1% change in  Price and Hence we call it as a Elastic Demand.

So the statement mentioned in the question contradicts with this and hence it is False.

13. FALSE. As the name suggest Income Elasticity of Demand is used to understand the sensitivity or the changes in quantity Demanded of a commodity due to changes in Income of Consumer and NOT due to changes in the price of the commodity. So the statement mentioned in the question contradicts with this and hence it is False.

14. CORRECT. Cross elascity of Demand is used to measure the percentage change in Quantity Demanded due to changes in Price of Another Commodity or service. It is due to Cross Elasticity of Demand we are able to analyse the changes in Demand due to the factor other that the price of commodity itself. eg. A Cross Elasticity of Demand will help us analyse the change in Demand for Tea due to change in Prices of Coffee. The statement mentioned in the question is coherent with this and hence it is True.

15. TRUE. A negative Elasticity is used to suggest the movement of the numerator of the Change in Quantity Demanded to the opposite Direction of the Chnage in Denominator. So a Negative coefficient or cross elasticity suggests that the Increase in Price of one having the effect of falling demand for other. E.g. increase in Price of Automobile have the Effect of Fall in Demand for Oil or Gas required for running the vehicle. OIL and CAR are complementary goods. The statement mentioned in the question is coherent with this and hence it is True.

16. FALSE. Income Elasticity of Demand Greater than 1 means the good is a superior good or a Luxury good while Income Elasticity less than 1 means that the good is Inferior. Often we see as the income rises the demand for luxury goods arise as the consumer shift to luxurious goods more even though they are costly due to rising social status and affordablility, this is the reason the Income Elasticity of luxury goods is greater than 1.

So this has nothing to do with complementary goods and the statement mentioned in the question contradicts with this and hence it is False.

17. TRUE. An Elastic Demand (supposingly if this is the Income Elasticity of Demand of the commodity) correctly means that a small change in Income causes a much larger change in the quantity demanded of the commodity. The Statement mentioned in the question is correct definiton of the what an Elastic Demand of Income will be and hence it is True.

18. FALSE. Correlation Coefficient helps us determine the degree of linear relationship between the two variables. Its value ranges from -1 to 1. While Closeness to -1 shows close but negative relationship between two variables, closeness to 0 shows no relationship or weak relationship between variables, closeness to 1 shows strong positive relationshio between two variables. So the statement mentioned in the question contradicts with this and hence it is False.