A positive cross-price elasticity for two goods and would arise if and were demand complements.

Question

Quizplus · Accepted Answer

A positive cross-price elasticity of demand indicates that the two goods are substitutes, meaning that as the price of one good increases, the demand for the other good also increases. For complements, the cross-price elasticity would be negative, indicating that an increase in the price of one good reduces the demand for the complementary good.

A Positive Cross-Price Elasticity for Two Goods and Would Arise