Gasoline and motel rooms are complements for many consumers.When the price of gasoline declines,consumers take longer vacations and rent more motel rooms.Therefore,the cross price elasticity between gasoline and motel rooms is
A) positive.
B) negative.
C) less than one because neither is a luxury.
D) more than one because both are luxuries.

Question

Quizplus · Accepted Answer

The cross price elasticity between complements is negative because a decrease in the price of one good (gasoline) leads to an increase in the demand for the other good (motel rooms).

Gasoline and Motel Rooms Are Complements for Many Consumers