Question

Fill in the blanks with appropriate alternatives given in the brackets:

1. The demand for salt is _______________. (elasticity/ inelastic/ infinite elastic/ unitary elastic)

2. Income elasticity of demand for inferior goods is __________. (positive/ negative/ zero/ greater than one)

3. Perfectly elastic demand curve is _________________. (horizontal to OX axis / horizontal to OY axis/ flatter/ steeper)

4. Cross elasticity of demand is applicable to ____________ goods. (unrelated/ substitute/ inferior/ natural)

5. The slope of demand curve is _______________ in case of inelastic demand. (flatter/ steeper/ horizontal/ vertical)

Answer 1

1) The demand for salt is inelastic.
Explanation:
Salt is a necessity good. In addition to this, there are no close substitutes available for salt. Thus, the demand for salt is inelastic i.e. any change in its price will not affect demand.

2) Income elasticity of demand for inferior goods is negative.
Explanation:
Inferior goods are those goods the demand for which is negatively related to income. In other words, inferior goods are those goods the demand for which decreases with an increase in income. Therefore, income elasticity of demand for inferior goods is negative.

3) Perfectly elastic demand curve is horizontal to OX axis.
Explanation:
Demand for a good is said to be perfectly elastic when the demand is infinitely responsive to changes in price. In other words, even a small change in price brings about a large change in demand. Such a demand curve is a horizontal straight line parallel to x-axis.



4) Cross elasticity of demand is applicable to substitute goods.
Explanation:
Cross elasticity of demand is a concept that is with regard to related goods. It is the measurement of the degree of responsiveness of quantity demanded due to change in the price of related goods. As substitute goods are a kind of related goods, cross elasticity of demand is applicable to such goods.

5) The slope of demand curve is steeper in case of inelastic demand.
Explanation:
Demand is said to be inelastic, When the demand for a good is less responsive to its price. In this case, the percentage change in the demand for a good is less than the percentage change in its price and |e_d| < 1. The demand curve in such situations is steeper.