Two goods are complements if the
A) price elasticity of each is greater than one.
B) income elasticity of each is negative.
C) cross-price elasticity is negative.
D) cross-price elasticity is positive.

Question

Quizplus · Accepted Answer

Complementary goods are those whose cross-price elasticity is negative, meaning that an increase in the price of one good leads to a decrease in the demand for the other. For example, movies and popcorn are complements, as a higher price for movies might result in fewer people buying popcorn at the theater. The price elasticity of each good or income elasticity are not sufficient indicators of complementarity.

Two Goods Are Complements If the