Asked by Sarah-Cate Parker on Jul 12, 2024
Verified
The cross-price elasticity of demand between good X and good Y is -0.8. Given this information, which of the following statements is true?
A) The demand for goods X and Y is elastic.
B) Goods X and Y are substitutes.
C) Goods X and Y are complements.
D) The demand for goods X and Y is income elastic.
Cross-price Elasticity
A measure of how the demand for one good responds to a change in the price of another good, indicating substitutes or complements.
Complements
Goods or services that are used together, such that an increase in demand for one leads to an increase in demand for the other.
- Distinguish between substitute goods and complementary goods through the analysis of cross-price elasticity figures.
Verified Answer
FR
Feranmi RaymondJul 13, 2024
Final Answer :
C
Explanation :
The negative cross-price elasticity of demand indicates that as the price of one good increases, the demand for the other good decreases, which is characteristic of complementary goods.
Learning Objectives
- Distinguish between substitute goods and complementary goods through the analysis of cross-price elasticity figures.
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