If the cross price elasticity between Goods A and B equals -1.3, then a reduction in the price of Good B will:
A)increase the demand for Good A and increase Good A's price as a result.
B)increase the demand for Good A and decrease Good A's price as a result.
C)decrease the demand for Good A and increase Good A's price as a result.
D)decrease the demand for Good A and decrease Good A's price as a result.

Question

If the cross price elasticity between Goods A and B equals -1.3, then a reduction in the price of Good B will:
A)​increase the demand for Good A and increase Good A's price as a result.
B)​increase the demand for Good A and decrease Good A's price as a result.
C)​decrease the demand for Good A and increase Good A's price as a result.
D)​decrease the demand for Good A and decrease Good A's price as a result.

Quizplus · Accepted Answer

A negative cross price elasticity indicates that Goods A and B are complements. Therefore, a reduction in the price of Good B will increase the demand for Good A, which can lead to an increase in Good A's price.

If the Cross Price Elasticity Between Goods a and B