ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Quantity demanded of product X will fall.
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Supply of product X will rise.
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The cross elasticity of demand will rise.
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The price of product X would rise
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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.
Detailed explanation-2: -When the cross-price elasticity of demand for two goods is negative, it is an indication that the goods are complements.
Detailed explanation-3: -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-4: -Cross-Price Elasticity If the percent change in the quantity demanded of good X is greater than the percent change in the price of good Y, the demand for good X is said to be cross-price elastic with respect to good Y, or responsive to changes in the price of good Y.
Detailed explanation-5: -If Exy is greater than zero, X and Y are substitutes because an increase in Py leads to an increase in Qx as X is substituted for Y in consumption.