ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the same elasticities of demand.
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very low price elasticities of demand.
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negative cross price elasticities of demand with respect to each other.
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positive cross elasticities of demand.with respect to each other
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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: -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-3: -A price increase of a complementary product will lead to lower demand or negative cross-price elasticity, and a price increase in a substitute product will lead to increased demand or a positive cross-price elasticity. Unrelated products have zero cross-price elasticity.
Detailed explanation-4: -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-5: -If two goods are complements, an increase in the price of one will lead to a reduction in the demand for the other – the cross price elasticity of demand is negative. If two goods are unrelated, a change in the price of one will not affect the demand for the other – the cross price elasticity of demand is zero.