ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Golf clubs and golf balls are complementary goods. This means that, as the price of golf clubs increases (a positive change), the consumption of golf balls decreases (a negative change). Cross price elasticity of demand is equal to the ratio of these changes and will be negative. The statement is false.

Detailed explanation-2: -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. so that if B gets more expensive, people are happy to switch to A. An example would be the price of milk.

Detailed explanation-3: -Example: the cross elasticity of demand of butter with respect to margarine is 0.81, so 1% increase in the price of margarine will increase the demand for butter by 0.81%. implies two goods are complements. Consumers purchase less B when the price of A increases.

Detailed explanation-4: -Cross-price elasticity measures how sensitive the demand of a product is over a shift of a corresponding product price. Often, in the market, some goods can relate to one another. This may mean a product’s price increase or decrease can positively or negatively affect the other product’s demand.

Detailed explanation-5: -Answer and Explanation: C. The cross-price elasticity of demand between complements is negative. This statement is true.