Question

Match the items of the following two lists and suggest the correct code:

List - I	List - II
(a) Zero Income Elasticity	(i) Substitute goods
(b) Unit Cross Elasticity	(ii) Complementary goods
(c) Positive Cross Elasticity	(iii) Indifferent goods
(D) Negative Cross Elasticity	(iv) Independent goods

Choose the correct option:

• A. $\left(a\right)-\left(iii\right),\left(b\right)-\left(ii\right),\left(c\right)-\left(i\right),\left(d\right)-\left(iv\right)$
• B. $\left(a\right)-\left(ii\right),\left(b\right)-\left(iii\right),\left(c\right)-\left(iv\right),\left(d\right)-\left(i\right)$
• C. $\left(a\right)-\left(iii\right),\left(b\right)-\left(iv\right),\left(c\right)-\left(i\right),\left(d\right)-\left(ii\right)$
• D. $\left(a\right)-\left(iv\right),\left(b\right)-\left(i\right),\left(c\right)-\left(ii\right),\left(d\right)-\left(iii\right)$

Answer 1

The correct option is C $\left(a\right)-\left(iii\right),\left(b\right)-\left(iv\right),\left(c\right)-\left(i\right),\left(d\right)-\left(ii\right)$

(a) Zero Income Elasticity is possessed by indifferent goods since indifferent goods provide the same level of satisfaction at every point on the indifference curve.

(b) Unit Cross Elasticity is possessed by independent goods. Independent goods are those goods which are not related to each other.
(c) Positive Cross Elasticity is possessed by substitute goods since substitute goods are those goods where the increase in price of one commodity also increases the demand for another good.

(D) Negative cross elasticity is possessed by complementary goods since complementary goods are those goods where increase in price of one good decreases the demand of another.