When two goods are unrelated,
A) the demands for both goods will be inelastic.
B) cross price elasticity of demand will be 0.
C) cross price elasticity of demand will be negative.
D) cross price elasticity of demand will be positive.

Question

Quizplus · Accepted Answer

When two goods are unrelated, the cross price elasticity of demand will be 0, meaning that a change in the price of one good will not affect the demand for the other good. Therefore, option B is the correct answer. Option A is incorrect because the elasticity of demand depends on the specific characteristics of the goods in question, rather than their relationship. Option C is incorrect because a negative cross price elasticity of demand would indicate that the two goods are complements, meaning an increase in the price of one leads to a decrease in demand for the other. Option D is incorrect because a positive cross price elasticity of demand would indicate that the two goods are substitutes, meaning an increase in the price of one leads to an increase in demand for the other.

When Two Goods Are Unrelated