Hello chegg team please give me answers of all question in 2

Hello chegg team, please give me answers of all question in 2 to 3 lines.

Q: 1 You manage the NIC bookstore. Instead of returning unsold new books to the publisher at cost, you keep the books and discount the price over time. Based on your knowledge of demand and supply, what type of elasticity will occur and equal to what? (2 lines)

Q: 2 Based on your knowledge of demand, supply and elasticity, when does an increase in income increase the amount spent on a product but keep the price unchanged? (2 lines)

Q: 3 True or False and why: If the demand for gold is inelastic, and the price of gold falls, the producers of gold should experience a reduction in their profits over time (2 lines)

Q:4 True or false and why: “A product with perfect substitutes has a price elasticity of zero” (2 lines)

Q: 5 You heard on the 2^nd floor at Tyee Hall: “Substitutes have a positive cross price elasticity of demand.” Do you agree with the statement? Why or why not? (2 lines)

Q:6 For the following goods or services discuss whether demand would be expected to be elastic or inelastic for the following goods & services. Make sure in your answer to explain why this would be true (2 lines each)

a) Sugar

b) Mercedes Benz

c) Water

d) Coffee

c) Milk

Solution

1) Since decrease in price leads to greater change in demand, thus price elasticity for new unsold books is elastic and greater than one.

2) When increase in income causes increased expenditure on that good this implies that the good is a normal good. Its income elasticity will be more than one.

3) Inelastic demand implies that the decrease in price leads to increased expenditure on hold. Thus the profits may not necessarily decrease as the output would increase despite the fall in price. Hence answer is false.

4) A product with substitutes will have positive cross price elasticity as decrease in price of one good will lead to decreased demnad for its substitute. This invariably implies that decrease in price of the good will lead to increased demand for the good as it is relatively cheaper. Hence elasticity will not be zero, rather it will be elastic.

5) It is true that substitute goods have positive price elasticity. As say, decrease in price of one good will lead to decreased demnad for its substitute as the substitute good now becomes relatively costlier.

6) a) Sugar being a necessity good will be price inelastic. Increase in price will have little effect on demand as it required by all.

b) Mercedes Benz is a luxury good so it will have an elastic demand. Change in their price will have greater effect on their demand.

c) Water being a necessity good will have inelastic demand as it has to be consumed for survival even if its price increases or decreases.

d) Coffee is a habitual good. So if the consumer is habitual to coffee he will consume even if its price changes in any direction. Thus it is price inelastic.

e) milk is a necessity good that has no ir little substitute hence its demand will be inelastic.