GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Positive
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Neutral
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Negative
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Unitary
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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. This suggests that A and B are complementary goods, such as a printer and printer toner. If the price of the printer goes up, demand for it will drop.
Detailed explanation-2: -If two goods are complements, an increase in the price of one will lead to a reduction in the demand for the other – the cross price elasticity of demand is negative.
Detailed explanation-3: -The cross elasticity of demand for two complementary products is always negative. Again, the stronger the complementary relationship between two products, the more negative the cross elasticity coefficient would be. For instance, if the price of XBOX increases, the demand for XBOX compatible games would reduce.
Detailed explanation-4: -Negative Cross Price Elasticity of Demand The cross price elasticity of demand will be negative when two goods are complements. Complementary products are goods that are consumed together. If the price of one good goes down, demand for its complement will increase and vice versa.