To determine whether two goods are substitutes or complements, an economist would estimate the:
A) price elasticity of demand.
B) income elasticity of demand.
C) cross elasticity of demand.
D) price elasticity of supply.

Question

Quizplus · Accepted Answer

To determine whether two goods are substitutes or complements, an economist would estimate the cross elasticity of demand. Cross elasticity of demand measures the responsiveness of demand for one good to changes in the price of another good. If the cross elasticity of demand is positive, the goods are substitutes, and if it is negative, the goods are complements.

To Determine Whether Two Goods Are Substitutes or Complements, an Economist