Gasoline and motel rooms are complements for many consumers. When the price of gasoline declines, consumers take longer vacations and rent more motel rooms. Therefore, the cross-price elasticity of demand between gasoline and motel rooms is
A) positive.
B) negative.
C) less than one because neither is a luxury.
D) more than one because both are luxuries.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand between two goods is negative when they are complements. This means that if the price of one good decreases, the demand for the other good increases, as is the case with gasoline and motel rooms.

Gasoline and Motel Rooms Are Complements for Many Consumers