If two goods, X and Y, have a negative cross- elasticity of demand, then we know that they
A) each have a price elasticity greater than one.
B) are both normal goods.
C) are substitutes.
D) are complements.
E) are both inferior goods.

Question

Quizplus · Accepted Answer

A negative cross-elasticity of demand indicates that the two goods are complements, meaning that an increase in the price of one good will lead to a decrease in the demand for the other good.

If Two Goods, X and Y, Have a Negative Cross-