ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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luxuries
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necessities
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compliments
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substitutes
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Detailed explanation-1: -A negative cross elasticity of demand indicates that the demand for good A will decrease as the price of B goes up. This suggests that A and B are complementary goods, such as a printer and printer toner. If the price of the printer goes up, demand for it will drop.
Detailed explanation-2: -This means that an increase in price leads to a fall in quantity demanded or the demand curve is downward sloping.
Detailed explanation-3: -If the goods are complements, their cross-price elasticity of demand is going to be negative. This is because a price change of Good A and quantity demanded of Good B move in the opposite direction: If the price of Good A increases, the quantity demanded of Good B decreases.
Detailed explanation-4: -If the income elasticity of demand is negative, then the good is inferior. This means when income increases, the demand for the good decreases.