BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
if the price of the product increases, the demand for the other product will decreases
|
|
|
if the price of one product decreases, the demand for the other product will decreases
|
|
|
if the price of one product decreases, the demand for other product will increases
|
|
|
none of the above
|
Detailed explanation-1: -Consequently, as the price of a product decreases, the demand for that product will increase.
Detailed explanation-2: -We determine whether goods are complements or substitutes based on cross price elasticity-if the cross price elasticity is positive the goods are substitutes, and if the cross price elasticity are negative the goods are complements.
Detailed explanation-3: -The cross elasticity of demand for substitute goods is always positive because the demand for one good increases when the price for the substitute good increases. Alternatively, the cross elasticity of demand for complementary goods is negative.
Detailed explanation-4: -A positive cross-price elasticity of demand between two products exhibits that the products are substitutes. This scenario implies that the price of one product has a positive relationship with the quantity demanded of another product.
Detailed explanation-5: -If the value is less than 1, demand is inelastic. In other words, quantity changes slower than price. If the number is equal to 1, elasticity of demand is unitary. In other words, quantity changes at the same rate as price.