Question

<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}--> Cross elasticity of demand applies to ?

• A. Substitute Goods
• B. Complimentary Goods
• C. Both 1 and 2
• D. None of the above

Answer 1

The correct option is C Both 1 and 2

<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}--> 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 (For example- Pepsi and Coca Cola ) because when the demand for one good increases, the price for the substitute good increases.

Alternatively, the cross elasticity of demand for complementary goods is negative (inkjet printer and ink cartridge).