If the price rises on olive oil by 10% and the quantity demanded of garlic drops...
If the price rises on olive oil by 10% and the quantity demanded of garlic drops by 5%, then the cross price elasticity indicates these two items are complimentary goods. Therefore, you would expect the cross price elasticity to be:
| unit elastic |
| positive |
| negative |
| there is not enough information to make a determination. |
Homework Answers
Answer is negative.
Cross price elasticity is calculated by dividing the % change in quantity demanded of good A by the % change in price of good B.
For complementary goods, the cross price elasticity is negative.
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If the price rises on olive oil by 10% and the quantity demanded
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