Question

The form of resource (input) substitution where one input can be exactly substituted for another in production is known as: Select one: a. Perfect substitutes b. Imperfect complements c. Imperfect substitutes d. Complementary substitutes e. Perfect complements

Answer 1

Answer:

A) Perfect substitutes

Explanation:

In business, perfect substitutes are products that are identical to each other, with similar characteristics, utility and price. They usually refer to certain commodities, specially agricultural products, e.g. corn. But the concept only refers to the products being on their primary state, for example once corn is processed into cooking oil, you can recognize the different brands like Mazola or Crisco.

Perfect substitutes shouldn't be branded or at least its purchase should not be influenced by its brand. In real life, perfect substitutes only apply to raw materials or primary goods, but as a concept it is used to explain how markets should theoretically work. E.g. perfect substitutes should all be price takers, identical and customers should not be able to distinguish between them.

Answer 2

Answer:

a) Perfect substitution

Explanation:

When two good or services can satisfy the same purpose, and their prices are closely matched then they are called perfect substitutes. Example.