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When an increase in price of one commodity decreases the demand for another commodity (negative cross...

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Economics

  1. When an increase in price of one commodity decreases the demandfor another commodity (negative cross price effect), then twocommodities are substitute goods  
  1. True
  2. False
  1. When the increase in price of one commodity decreases thedemand for another commodity (negative cross price effect), thenthe two commodities are said to be complementarygoods  
  1. True
  2. False
  1. An increase in income of consumers will result in an increasein demand of a commodity only if, it is considered as a superiorcommodity by the consumers
  1. True
  2. False
  1. An increase in advertising outlay by a firm increases thequantity demand of its product because it enhances its quality
  1. True
  2. False
  1. An increase in expected/future price of a commodity will alwaysincrease its demand in the present period
  1. True
  2. False

Answer & Explanation Solved by verified expert
4.4 Ratings (865 Votes)
When an increase in price of one commodity decreases the demand for another commodity negative cross price effect then two commodities are substitute goods Answer FALSE Cross price effect is said to be negative when increase in the price of one commodity leads to a decrease in the demand for another commoditySubstitute goods are those goods which satisfy the same type of need and hence can be used in place of one another to satisfy a given want In case of substitute goods cross price effect is positive and not negative An increase in the price of one good causes an increase in the demand of another good its substitute as substitute is now relatively cheaper For example tea and coffee    See Answer
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