New Enroll for RBI, PFRDA & NABARD Intro Class! April 18 at 9:15 PM

    Question

    Two goods will be classified as ______ if the

    cross-price elasticity between them is negative.
    A Normal Correct Answer Incorrect Answer
    B Inferior Correct Answer Incorrect Answer
    C Substitutes Correct Answer Incorrect Answer
    D Complements Correct Answer Incorrect Answer
    E Luxury Correct Answer Incorrect Answer

    Solution

    The cross elasticity of demand is  an economic concept that measures the responsiveness in the quantity demanded of one good when the price for another good changes . Complementary goods  are products which are used together like toothbrush and toothpaste. The cross elasticity of demand for complementary goods is negative i.e. as the price of one good goes up, the demand for both goods fall.

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