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A family spending on a product has to be increased when product price increases. Defend or refute. |
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Answer» Solution :(i) We defend or refute this statement DEPENDS upon the price ELASTICITY of demand. (ii) The given statement can be Defend when demand for this particular product is price - inelastic then price and total expenditure moves in same direction. So, when product price increases, then family expenditure also increases. For example, Necessity goods, petrol. (iii) The given statement can be Refuted when demand is price - elastic or unitary elastic. (a) It is so because when price elasticity is Elastic, then price and total expenditure moves in opposite direction. So, when product price increases, then family expenditure FALLS. (b) It is so because when price is unitary elastic, then price increases, and expenditure remains CONSTANT. So, when product price increases, then family expenditure remains constant. |
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