Problem 1: For each of the following claims, please state if it is true, false o

Question

Problem 1: For each of the following claims, please state if it is true, false or uncertain. Provide a brief written justification for your answer (a sentence or two will suffice). (1) When the price of tomato sauce increases by 5%, the quantity demanded drops by 10%. Then, demand of for tomato sauce is elastic. (2) Notebooks have an inelastic demand. When the price of notebooks drops by 1%, the quantity demanded demand increases by 2%. (3) The quantity of coffee demanded drops by 5% after that the price increase by 5%. It means that the demand for coffee is unit elastic. (4) Demand a farmer

Explanation / Answer

1) true ; as demand is dependent on price, when price increases, the demand decreases 2) false ; its elastic, as demand is dependent on price, when price decreases, the demand increases by some proportion 3) true : because the proportion of demand drop is same. 4) uncertain : price of wheat and farmers income have a missing linkage 5) false :public transport is an inferior good and its demand decreases as consumers income increases 6) false increase in price of cheese will not affect the demand at all if its perfectly inelastic.

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