If there are only two goods and these are consumed in fixed proportions,the price elasticities of demand for these two goods will sum to
A)0.0
B)-0.5
C)-1.0
D)a number between 0 and -1.

Question

Quizplus · Accepted Answer

When two goods are consumed in fixed proportions, the price elasticities of demand for these goods are inversely related. This means that if the price elasticity of demand for one good is high (i.e., greater than 1), the price elasticity of demand for the other good will be low (i.e., less than 1), and vice versa. Therefore, the sum of the price elasticities of demand for these two goods will always be equal to -1.0.

If There Are Only Two Goods and These Are Consumed