If two goods are complements, their cross elasticity of demand will normally be
A)zero.
B)a negative number.
C)a positive number.
D)infinity.

Question

Quizplus · Accepted Answer

If two goods are complements, it means that they are typically consumed together. For instance, peanut butter and jelly are complements as they are often consumed together. This means that if the price of peanut butter increases, consumers may be less likely to purchase jelly, thus resulting in a decrease in demand for jelly. Therefore, there is an inverse relationship between the price of one good and the quantity demanded of the other good. Hence, the cross elasticity of demand is negative.

If Two Goods Are Complements, Their Cross Elasticity of Demand