ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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normal goods
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substitute goods.
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goods in composite demand.
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complementary goods.
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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: -Substitute Goods When the cross-elasticity of demand is positive, the product, Y, is substituted for X. In this case, before experiencing an increase in price Y, the quantity demand of X will increase.
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: -Answer and Explanation: A cross-price elasticity greater than zero implies a positive cross-price elasticity. For substitute goods, the cross-price 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.
Detailed explanation-5: -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.