When there is a positive cross-price elasticity of demand between two goods,
A)they are independent goods
B)they are complementary goods
C)they are substitute goods
D)they are normal goods
E)the income elasticity of demand is positive

Question

Quizplus · Accepted Answer

A positive cross-price elasticity of demand indicates that the two goods are substitute goods, meaning that an increase in the price of one good will lead to an increase in demand for the other good. Complementary goods, on the other hand, have a negative cross-price elasticity, meaning an increase in the price of one good leads to a decrease in demand for the other. If two goods are independent, their cross-price elasticity of demand is zero. The income elasticity of demand is not relevant to this question.

When There Is a Positive Cross-Price Elasticity of Demand Between