HomeQuestionsEconomicsCross-Price Elasticity of Demand
📚 Learning Guide
Cross-Price Elasticity of Demand
hard

If the cross-price elasticity of demand between two goods is negative, this indicates that they are __________.

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

substitutes

B

independent goods

C

complements

D

luxury goods

Understanding the Answer

Let's break down why this is correct

Answer

If the cross-price elasticity of demand between two goods is negative, this indicates that they are complements. Complements are goods that are often used together, so when the price of one good goes up, the demand for the other good tends to go down. For example, if the price of coffee increases, people may buy less coffee, and as a result, they might also buy less sugar, which they often use with their coffee. This negative relationship shows that the two goods are linked in consumption. Understanding this helps businesses and consumers see how changes in prices can affect their buying choices.

Detailed Explanation

When two goods are complements, they are used together. Other options are incorrect because Some might think substitutes are related because they can replace each other; Independent goods are not related at all.

Key Concepts

Cross-Price Elasticity of Demand
Complementary Goods
Substitutes
Topic

Cross-Price Elasticity of Demand

Difficulty

hard level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.

Start Learning with SeekhExplore More Cross-Price Elasticity of Demand Questions