Problem
1. You may have noticed that the market demand curve is always flatter than any individual demand curve. Is market price elasticity of demand also always lower than individual price elasticity of demand? Why or why not?
2. Indicate whether the following statements are true, false, or uncertain. If false or uncertain, explain why.
a. The price of a watch increases by 10%, and you spend a larger fraction of your income on it. The watch is a Giffen good.
b. Due to a flood, corn prices and soybean prices increase. If corn and soybeans are substitutes, the quantity of corn demanded falls.
c. Goods 1 and 2 are substitutes, and goods 2 and 3 are substitutes. This must mean that goods 1 and 3 are substitutes.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.