Asked by Sharika Sykes on Sep 24, 2024
Verified
For complements,cross price elasticity of demand is:
A) Negative
B) Positive
C) between zero and one only
D) zero.
Complements
Goods or services that are used together, where the consumption or use of one increases the value or demand for the other.
Negative
Characterized by lack or absence, often used in contexts such as negative growth (decline) or negative feedback (criticism).
- Analyze the importance of substitute and complementary goods in assessing the elasticity of demand.
Verified Answer
LM
Lindsay Martinezabout 9 hours ago
Final Answer :
A
Explanation :
Cross price elasticity of demand measures the responsiveness of quantity demanded of one good to changes in the price of another good. When the two goods are complements, a decrease in the price of one good leads to an increase in demand for the other good, and vice versa. This inverse relationship results in a negative cross price elasticity of demand.
Learning Objectives
- Analyze the importance of substitute and complementary goods in assessing the elasticity of demand.