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Question
If the goods are complementary like car and petrol, their cross elasticity is ____________.
If the goods are complementary like car and petrol, their cross elasticity is ____________.
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Solution
The correct option is B Negative
Two goods that set off each other have a negative cross elasticity of demand as
the price of good Y rises, the demand
for good X falls. A
positive cross-price elasticity value indicates
that the two goods are
alternate.
Cross elasticity of
demand between petrol and car is negative. Petrol and car are complementary
goods as when the price of petrol rises, the demand for car falls. Hence, cross
elasticity of demand between petrol and car is negative.
Thus, the correct option is A.
Two goods that set off each other have a negative cross elasticity of demand as the price of good Y rises, the demand for good X falls. A positive cross-price elasticity value indicates that the two goods are alternate.
Cross elasticity of
demand between petrol and car is negative. Petrol and car are complementary
goods as when the price of petrol rises, the demand for car falls. Hence, cross
elasticity of demand between petrol and car is negative.
Thus, the correct option is A.
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