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1. As a manager, Faisal was calculating the cross elasticity of two products, he found the...

1. As a manager, Faisal was calculating the cross elasticity of two products, he found the value of cross elasticity to be negative. Could you help him in finding the nature of these two products?

a. Difficult to say anything

b. The products are Complementary

c. The products are Substitute

d. The products are not related

.

2. In a market the price ceiling is set above the equilibrium, Do you think this is binding?

a. It is not binding as equilibrium is possible

b. It is binding as equilibrium is not possible

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Homework Answers

Answer #1

1.B) The Products are complementary.

Complementary Products have negative cross elasticity of demand.that means if there is increase in price of one product then demand of another goods will goes down and vice-versa.

2. A) It is not binding as equilibrium is possible

If price ceiling is set above the equilibrium price it is not binding.it has no impact on the market because the price can move to equilibrium without restriction.

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