Question

1) The amount of time analyzed whether to buy a product is quite long. The demand for this product is

elastic or inelastic

2) The proportion of the budget spent on the item is very small. The demand for this product is

elastic or inelastic

3) An increase in the quantity demanded could be caused by: (if the product is a superior good with substitute and complementary goods. Choose all of the correct items)

a) an increase in the price of substitute goods

b) a decrease in the price of complementary goods

c) an increase in consumer income levels

4) There are lots of substitutes available. The demand for this product is

elastic or inelastic

5)The product is highly durable. The demand for this product is
      
elastic or inelastic

Answer 1

1) The amount of time analyzed whether to buy a product is quite long. The demand for this product is elastic .

Explanation: In long run, consumer has more time to adjust their demand according to change in price. Hence, in long run demand is more elastic.

2) The proportion of the budget spent on the item is very small. The demand for this product is inelastic

Expalnation: The proportion of the budget spent in item is very small. If there is an increase in price then the quantity demanded will not affected that much. Hence, demand is inelastic.

3) There is an increase in demand which resulted from rightward shift of the demand curve. A decrease in price of complementayr goods or an increase in consumer income level of will shift the demand curve to the right.

Answer: Option (B) and Option (C)

4) There are lots of substitutes available. The demand for this product is elastic.

Expalnation: Availaility of substitute goods gives choices to consumer. Hence, demand is elastic.

5) The product is highly durable. The demand for this product is elastic.

Explanantion: Durable goods are last long and can be used repeatedly. Hence, demand is elastic.