If the cross-price elasticity of demand of two goods is 2.5,what would the two goods be
A)complements
B)luxuries
C)normal goods
D)substitutes

Question

Quizplus · Accepted Answer

A cross-price elasticity of demand of 2.5 indicates that the two goods are substitutes, meaning that an increase in the price of one good would lead to an increase in demand for the other (and vice versa). Complements would have a negative cross-price elasticity of demand, while luxury and normal goods are not determined by cross-price elasticity alone.

If the Cross-Price Elasticity of Demand of Two Goods Is