Goods are _____ when the cross-price elasticity of demand is positive and _____ when the cross-price elasticity of demand is negative.
A)substitutes;complements
B)complements;substitutes
C)elastic;inelastic
D)inelastic;elastic

Question

Quizplus · Accepted Answer

When the cross-price elasticity of demand is positive, it means that an increase in the price of one good leads to an increase in the demand for the other good. Such goods are called substitutes. On the other hand, when the cross-price elasticity of demand is negative, it means that an increase in the price of one good leads to a decrease in the demand for the other good. Such goods are called complements. Therefore, the correct answer is (A) substitutes; complements.

Goods Are _____ When the Cross-Price Elasticity of Demand Is