ECONOMICS
ELASTICITY OF DEMAND
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]


Goods X and Y are complementary goods.


Goods X and Y are substitute goods.


Good X is an inferior good.


Good Y is an inferior good.

Detailed explanation1: Therefore, if a 30% increase in the price causes a 15% decrease in the quantity demanded, then this would give a price elasticity of demand equal to 0.5 in absolute terms.
Detailed explanation2: The cross‐price elasticity of demand is given by the formula: If the percentage change in the quantity demanded of good X is greater than the percentage change in the price of good Y, the demand for good X is cross‐price elastic with respect to good Y, or very responsive to changes in the price of good Y.
Detailed explanation3: Definition: Cross elasticity (Exy) tells us the relationship between two products. it measures the sensitivity of quantity demand change of product X to a change in the price of product Y. Price elasticity formula: Exy = percentage change in Quantity demanded of X / percentage change in Price of Y..
Detailed explanation4: Answer and Explanation: A crossprice elasticity greater than zero implies a positive crossprice elasticity. For substitute goods, the crossprice elasticity of demand is always positive. This implies that as the price of one good increases, the demand for the other good, which is a substitute, increases.