If we are trying to determine if two different products are substitutes,complements,or not related at all,we should find the value of the
A) price elasticity of demand for both goods.
B) price elasticity of supply for both goods.
C) income elasticity of demand for both goods.
D) cross elasticity of demand.
E) price elasticity of demand and the price elasticity of supply for both goods.

Question

Quizplus · Accepted Answer

To determine the relationship between two products, we need to find the cross elasticity of demand which measures the percentage change in the quantity demanded of one good in response to a percentage change in the price of another good. If the cross elasticity is positive, it indicates that the two goods are substitutes (when the price of one good goes up, people switch to the other good). If the cross elasticity is negative, it indicates that the two goods are complements (when the price of one good goes up, the demand for the other good goes down). And if the cross elasticity is close to zero, it indicates that the two goods are not related.

If We Are Trying to Determine If Two Different Products