Suppose the cross-price elasticity for two goods is negative. The two goods are:
A)normal goods
B)substitutes
C)complements
D)inferior goods

Question

Quizplus · Accepted Answer

A negative cross-price elasticity indicates that the two goods are complements. As the price of one good increases, the demand for the other good decreases, indicating that they are often consumed together. If the cross-price elasticity is negative, it means that the two goods are complementary. This is because when the price of one good increases, the demand for the other good decreases (and vice versa).

Suppose the Cross-Price Elasticity for Two Goods Is Negative