An economic measure that indicates when the demands for two or more goods are related is
A)the income elasticity of demand.
B)the price elasticity of demand.
C)the substitute elasticity of demand.
D)the cross elasticity of demand.
E)the normal elasticity of demand.

Question

Quizplus · Accepted Answer

The cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. If the cross elasticity of demand is positive, then the two goods are substitutes, meaning that an increase in the price of one good will lead to an increase in the demand for the other. If the cross elasticity of demand is negative, then the two goods are complements, meaning that an increase in the price of one good will lead to a decrease in the demand for the other. Therefore, the cross elasticity of demand is a measure that indicates when the demands for two or more goods are related.

An Economic Measure That Indicates When the Demands for Two