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Cross elasticity of demand applies to
Cross elasticity of demand applies to
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The correct option is C Both a and b
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.
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. For example Two goods (A and B) are complementary if using more of good A requires the use of more good B. For example, ink jet printer and ink cartridge are complements.
Two goods (C and D) are substitutes if using more of good C replaces the use of good D. For example, Pepsi Cola and Coca Cola are substitutes.
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.
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. For example Two goods (A and B) are complementary if using more of good A requires the use of more good B. For example, ink jet printer and ink cartridge are complements.
Two goods (C and D) are substitutes if using more of good C replaces the use of good D. For example, Pepsi Cola and Coca Cola are substitutes.
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