Task 4 For each of the following statements, state whether it is true or false

A. TRUE , AN INFERIOR GOOD IS THAT GOOD WHOSE DEMAND DECREASE WHEN INCOME INCREASE. IF A CONSUMER IS CONSUMING SOMETHING WHICH IS POISONOUS THEN IT MEANS HE CANNOT AFFORD TO BUY SOMETHING BETTER, IF HE HAD INCOME HE WOULD NOT HAVE CONSUMED POISONOUS COMMODITY. SO DEFINITELY IT IS AN INFERIOR COMMODITY.

B) FALSE: IN THE ABOVE MENTIONED CASE ALL GOODS ARE HAVING UNITARY ELASTIC DEMAND. ie % CHANGE  IN QUANTITY DEMANDED DIVIDED BY CHANE IN PRICE  = 1, BUT ALL GOODS CANNOT HAVE UNITARY ELASTIC DEMAND AND ALL GOODS CANNOT FOLLOW THE LAW OF DEMAND ( LAW OF DEMAND STATES THAT WHEN PRICE INCREASE DEMAND DECREASE, THERE CAN BE EXCEPTIONS)

1.GOODS CAN BE OF DIFFERENT TYPES- THERE ARE TWO TYPES OF GOODS GIFFEN GOODS AND VEBLEN GOODS WHERE LAW OF DEMAND IS AN EXCEPTION. FOR THESE GOODS WHEN PRICE INCREASES DEMAND INCREASE.

2. INCREASE IN PRICE IS EQUAL TO INCREASE IN DEMAND SUCH GOODS ARE HAVING UNITARY ELASTIC DEMAND.

3. INCREASE IN PRICE WILL BE LESS THAN INCREASE IN DEMAND SUCH GOODS WILL BE HAVING HIGH ELASTICITY OF DEMAND.

4.INCREASE IN PRICE WILL BE MORE THAN INCREASE IN DEMAND SUCH GOODS WILL BE HAVING LESS ELASTIC DEMAND.

ie GOODS WILL NOT BE SAME AND ALL GOODS WILL NOT HAVE UNITARY ELASTIC DEMAND

C) TRUE: WHEN INCOME OF THE CONSUMER PRICE OF ALL GOODS INCREASED  BY 10% INCOME OF THE CONSUMER ALSO INCREASED BY 10% IT MEANS THERE IS NO CHANGE IN THE REAL INCOME OF THE CONSUMER SO NOW THE CONSUMER IS ABLE TO BUY ONLY THE SAME BUNDLES OF GOODS THAT HE USED TO BUY BEFORE THE PRICE RISE, THERE IS NO CHANGE IN THE QUANTITY DEMANDED OR PURCHASING POWER OF THE CONSUMER, IT REMAINS THE SAME.