ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The correct answer is option a. the cross elasticity of demand is negative. The cross-price elasticity between two goods may have positive or negative signage. It is ascertained by dividing the percentage change in quantity demanded of one good by the percentage change in the price of another good.

Detailed explanation-2: -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-3: -A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two products are substitutes. If products A and B are complements, an increase in the price of B leads to a decrease in the quantity demanded for A, as A is used in conjunction with B.

Detailed explanation-4: -If a good’s price elasticity is 0 (no amount of price change produces a change in demand), it is perfectly inelastic. If price elasticity is exactly 1 (price change leads to an equal percentage change in demand), it is known as unitary elasticity. The availability of a substitute for a product affects its elasticity.

Detailed explanation-5: -When the price elasticity of demand is unit (or unitary) elastic (Ed = −1), the percentage change in quantity demanded is equal to that in price, so a change in price will not affect total revenue.