📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!
  • google app store apple app store
    • ✖

      Question

      In a model with two goods, x & y, with x plotted on the

      horizontal axis, the price consumption curve generated by changing the price of x is parallel to the x – axis. This implies that
      A The demand fro x is perfectly Inelastic Correct Answer Incorrect Answer
      B The demand for y has zero elasticity Correct Answer Incorrect Answer
      C The demand fro x has elasticity = -1 Correct Answer Incorrect Answer
      D The demand fro y has elasticity = -1 Correct Answer Incorrect Answer

      Solution

      If PCC (Price consumption curve) is horizontal (due to change in price of x), it means Y is not changing and only X in changing. Equation of Budget line is Px.X + Py.Y =M. In this case, total expenditure on X remains same (even if there is change in price of X) and hence price elasticity is -1 for good X.

      Practice Next
      More Research Questions
      ask-question