31. he absoluto ise of the contt indicatest of the coefficient of erosa elastici

Question

31. he absoluto ise of the contt indicatest of the coefficient of erosa elasticity daaand a. chat the gooda ate nhotitute that the that good goods are .ubs titute. on good is a normal good and eha other good ia an infertor the degree of aubatitutabt1ey or complenentarity rt-run eoerescient ot lastieity for gasoline ia ikely to be: a greater than one equal to one b. Less than oe d. none of the above the next question on tha basiarof tha tollowing dlagram when marginal product is ero, total product is at a maximum is rising is falling 33. This diagram suggests that: b. when marginal product 11as above avarage product, average product c. when marginal product liea below average product, average product d. all of the above hold true

Explanation / Answer

31)b) If the cross price elasticity of demand is possitive then goods are substitute. If the cross price elasticity of demand is negative then goods are complements. Since we are talking about absolute size of coefficient,so cross price elasticity of demand is possitive. So goods are substitute.

32) c) less than one. because gasoline has a very few substitute. So we consider gasoline as a complement good and coefficient of elasticity is <1.

33)d) Here 1 = MP curve

2 = AP curve

3 = TP curve.

In this diagram there are 3 stage. In 1st stage, MP,AP and TP increases bou not in the same rate . In stage 2, TP continues to increases at a diminising rate and reaches max at the end of this stage. In this stage both MP and AP are falling but still possitive. In 3rd stage, TP curve decreases,MP curve becomes negative and both AP and MP curve falling.

So (d) is true.

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