If two goods,X and Y,have a negative cross elasticity of demand,then we know that they
A)are substitutes.
B)are complements.
C)are both inferior goods.
D)each have a price elasticity greater than one.
E)are both normal goods.

Question

Quizplus · Accepted Answer

A negative cross elasticity of demand means that as the price of good X increases, the quantity demanded of good Y decreases. This is a characteristic of complements, which are goods that are consumed together. For example, if the price of hot dogs (good X) increases, the demand for hot dog buns (good Y) will decrease, since people are less likely to buy hot dog buns if they aren't buying hot dogs. Therefore, the correct answer is B.

If Two Goods,X and Y,have a Negative Cross Elasticity of Demand,then