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  • ICAR and TNAU E-Course Summarized

    Summarized Notes
  • The cross elasticity of demand between 2 products is infinite, it is case of

    Question: The cross elasticity of demand between 2 products is infinite, it is case of

    Options:

    Monopoly
    Oligopoly slope
    Monopolistic
    Perfect competition

    ✅ Explanation: In perfect competition, products are perfect substitutes for each other. This means consumers can easily switch between products if the price of one changes, leading to infinite cross-price elasticity of demand.

    📌 Other Options Explanations:
    -Monopoly: A single seller dominates the market.
    -Oligopoly: Few sellers dominate the market, often with differentiated products.
    -Monopolistic competition: Many sellers offer differentiated products, with some control over price.

    🔑Key Points:

    • Cross price Elasticity:
    -Cross price elasticity of demand is a measure of how responsive a good's demand is to a change in the price of a related good.
    -It is always expressed as a percentage.
    -The cross elasticity of demand for substitute goods is always positive because the demand for one good increases when the price for the substitute good increases.
    -Alternatively, the cross elasticity of demand for complementary goods is negative

    • Cross price elasticity of Complementary goods:
    -The demand for complementary items will have a negative cross elasticity.
    -When the price of one commodity rises, demand for the other two goods falls.

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