The cross elasticity between computers and software is
A) negative because they are substitutes.
B) positive because they are substitutes.
C) negative because they are complements.
D) positive because they are complements.
E) positive because they are normal goods.

Question

Quizplus · Accepted Answer

Cross elasticity measures the responsiveness of demand for one good to changes in the price of another good. If two goods are complementary, an increase in the price of one will lead to a decrease in demand for both (and therefore a negative cross elasticity). Since computers and software are complements (you need software to run on a computer), the cross elasticity between them is negative.

The Cross Elasticity Between Computers and Software Is