Asked by courtney mitchell on Jul 17, 2024
Verified
The cross-price elasticity of demand between good X and good Y is -3. 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 their substitutability or complementarity.
Complements
Goods or services that are used together, where an increase in demand for one leads to an increase in demand for the other.
- Differentiate between substitutes and complements based on cross-price elasticity values.
Verified Answer
BW
Breshay WaltonJul 22, 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. Therefore, goods X and Y are complements.
Learning Objectives
- Differentiate between substitutes and complements based on cross-price elasticity values.
Related questions
The Cross-Price Elasticity of Demand Between Good X and Good ...
The Cross-Price Elasticity of Demand Between Good X and Good ...
The Cross-Price Elasticity of Demand of Substitute Goods Is ...
Suppose the Cross-Price Elasticity of Demand for Butter and Margarine ...
Suppose the Cross-Price Elasticity Between Two Goods Is 1 ...