Cross-price elasticity of demand is rev: 05_14_2018 Multiple Choice unitary for secondary goods. positive for general...

Question

Question

Cross-price elasticity of demand is

rev: 05_14_2018

Multiple Choice

unitary for secondary goods.

positive for general goods.

negative for substitute goods.

negative for complementary goods.

Answer 1

Answer #1

Option D.

Cross price elasticity of demand is negative for complementary goods.
The cross price elasticity of demand also known as the cross elasticity of demand refers to the responsiveness of one goods demand based on the changes in the price of the other good.
It is measured as the percentage change in demand of one good divided by the percentage change in the price of another good.
The cross price elasticity of demand is usually positive for substitute goods as the demand of one good increases or decreases with the Increase or decrease in the price of another good.
But for complementary goods its value is negative as the demand of one good decreases with the Increase in the price and decrease in the demand of another good and vice versa.

Answer 2

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