When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, and the sale of dips (like salsa and bean dip)fell 8 percent.This set of facts indicates that the cross-price elasticity between tortilla chips and dips is ________, so the two are ________.

Question

Quizplus · Accepted Answer

A negative cross-price elasticity suggests that the two goods are complements, so as the price of tortilla chips rose, the quantity of both tortilla chips and dips sold both fell. The magnitude of -0.8 indicates a relatively strong complementarity between the two goods, meaning that an increase in the price of one good has a large effect on the quantity demanded of the other good.

When the Price of Tortilla Chips Rose by 10 Percent