Author Question: The number of substitutes available affects the price elasticity of demand for a good. So one way to ... (Read 132 times)

magmichele12

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The number of substitutes available affects the price elasticity of demand for a good. So one way to know if apples and oranges are substitutes for each other is to look at the price elasticity of demand for each. Comment on this assertion.
 
  What will be an ideal response?

Question 2

Because of free riders, a private, unregulated market would not produce the efficient quantity of a public good.
 
  Indicate whether the statement is true or false



nhea

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Answer to Question 1

Their separate elasticities do not indicate whether apples and oranges are substitutes for each other. If apples and oranges are not substitutes but each had many other substitutes, then their separate price elasticities will be high. To conclude that apples and oranges are substitutes for each other, the cross elasticity of demand between them must be positive.

Answer to Question 2

TRUE



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