If two goods both had positive cross elasticities and positive income elasticities,
A)they are both normal and substitutes for one another.
B)they are both normal and complements for one another.
C)they are both inferior and substitutes for one another.
D)they are both inferior and complements for one another.

Question

If two goods both had positive cross elasticities and positive income elasticities,
A)​they are both normal and substitutes for one another.
B)​they are both normal and complements for one another.
C)​they are both inferior and substitutes for one another.
D)​they are both inferior and complements for one another.

Quizplus · Accepted Answer

Positive cross elasticity implies that if the price of one good increases, the demand for the other good also increases, indicating that they are substitutes. Positive income elasticity means that as income increases, the demand for both goods also increases, indicating that they are normal goods. Therefore, the two goods are normal and substitutes for one another.

If Two Goods Both Had Positive Cross Elasticities and Positive