If the cross elasticity of demand between goods X and Y is positive and between goods X and Z is negative, then X and Y are ________ and X and Z are ________.
A) price inelastic; complements
B) complements; substitutes
C) substitutes; complements
D) price inelastic; income elastic

Question

Quizplus · Accepted Answer

A positive cross elasticity of demand indicates that goods X and Y are substitutes, while a negative cross elasticity of demand indicates that goods X and Z are complements.

If the Cross Elasticity of Demand Between Goods X and Y