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Abnormal Goods

If A and B fa...

Question

If A and B factors are perfect substitutes, then elasticity of substitution is ________.

A

zero

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B

infinite

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C

one

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D

greater than one

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Solution

The correct option is A infinite
Since A and B are perfect substitutes consumers will be indifferent when purchasing the two products as both products give the consumer the same value. Graphically, the demand curve would be horizontal.

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