# ECONOMICS (CBSE/UGC NET)

## ECONOMICS

### ELASTICITY OF DEMAND

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
If the cross price elasticity between 2 goods is positive, what is the relationship between these 2 goods?
 A Substitutes B Complements C No relationship D Factor Inputs
Explanation:

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: -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: -If the goods are substitutes, their cross-price elasticity of demand is going to be positive. This is because a price change of Good A and quantity demanded of Good B move in the same direction: If the price of Good A increases, the quantity demanded of Good B increases.

Detailed explanation-4: -Independent goods have a cross-price elasticity of zero: as the price of one good increases, the demand for the second good is unchanged.

There is 1 question to complete.