ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The good is normal
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The good is inferior
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The good is a substitute
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The good is a complement
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Detailed explanation-1: -A positive cross elasticity of demand means that the demand for good A will increase as the price of good B goes up. This means that goods A and B are good substitutes.
Detailed explanation-2: -If price elasticity is greater than 1, the good is elastic; if less than 1, it is inelastic. If a good’s price elasticity is 0 (no amount of price change produces a change in demand), it is perfectly inelastic.
Detailed explanation-3: -If the cross-price elasticity of demand is positive, the goods are substitutes. If the cross-price elasticity of demand is negative, the goods are complements.
Detailed explanation-4: -Elastic demand If the absolute value of the cross elasticity of demand is greater than 1, the cross elasticity of demand is elastic, this means that a change in price of good A results in a more than proportionate change in quantity demanded for good B.