ECON 103 Cross Elasticity Questions


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Question 1. [5 points) If the cross-price elasticity of demand between chocolates and
icecreams is 0.5, then are chocolates and icecreams substitutes or
complements? Explain.
Question 2. [5 points] Examine whether the following statement is true or false. Explain.
The income elasticity of demand is positive for a normal good.
Question 3. Examine whether each of the following statements is true or false. Explain.
a. [5 points] Average variable cost rises as output rises if marginal cost exceeds
average total cost.
b. [5 points] Average total cost falls as output rises if marginal cost is less than average
variable cost.

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