Question : Statement 1: The concept of elasticity of demand measures the responsiveness of quantity demanded to a change in price.
Statement 2: The price elasticity of demand for a good is always positive.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statement 1 and statement 2 are true.
Option 4: Both statement 1 and statement 2 are false.
Correct Answer: Statement 1 is true, and statement 2 is false.
Solution : The correct answer is (a) Statement 1 is true, and statement 2 is false.
Statement 1 is true because elasticity of demand is a measure of how much the quantity demanded of a good changes in response to a change in price.
Statement 2 is false because the price elasticity of demand can be positive, negative, or zero. The sign of the elasticity of demand depends on the nature of the good and the market. For example, the demand for luxury goods is typically elastic, meaning that a small change in price can lead to a large change in quantity demanded. The demand for necessities, on the other hand, is typically inelastic, meaning that a large change in price can lead to a small change in quantity demanded.
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