GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Under the cross elasticity of demand between two complimentary products
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if the price of one product increase, the demand for other product will increases
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if the price of one product decrease, the demand for other product will decreases
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if the price of one product decreases, the demand for other product will increases
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none of the above
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Explanation:
Detailed explanation-1: -The cross elasticity of demand for substitute goods is always positive because the demand for one good increases when the price for the substitute good increases. Alternatively, the cross elasticity of demand for complementary goods is negative.
Detailed explanation-2: -Answer and Explanation: If the cross-price elasticity of demand between two goods is negative, then the goods are considered to be complementary goods.
Detailed explanation-3: -Answer and Explanation: If the cross-price elasticity of demand between two commodities is positive, then these commodities are substitutes. In case the cross elasticity of demand for two goods is positive, that would mean that they are substitutes for each other.
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