A firm sells two goods X and Y)that are related in consumption.The estimated demand and cost conditions are: Goods X and Y are
A)complement
B)substitutes
C)independent
D)normal
E)inferior

Question

A firm sells two goods X and Y)that are related in consumption.The estimated demand and cost conditions are:  Goods X and Y are
A)complement 
B)substitutes 
C)independent 
D)normal 
E)inferior

Quizplus · Accepted Answer

The fact that the two goods are related in consumption suggests that they are substitutes or complements. Given that the cross-price elasticity of demand is negative, it indicates that the two goods X and Y are substitutes. Therefore, the best choice is B.

A Firm Sells Two Goods X and Y)that Are Related