If goods A and B have a cross elasticity of demand that is positive, this is evi

Question

1. If goods A and B have a cross elasticity of demand that is positive, this is evidence that goods A and B are __________ goods. a. substitute b. normal c. complementary d. inferior

If goods A and B have a cross elasticity of demand that is positive, this is evidence that goods A and B are __________ goods. a. substitute b. normal c. complementary d. inferior If goods A and B have a cross elasticity of demand that is positive, this is evidence that goods A and B are __________ goods. substitute normal complementary inferior a. substitute b. normal c. complementary d. inferior

Explanation / Answer

The correct answer is A. substitute
[Cross price elasticity of demand positive means that if the price of one good goes up, the demand for the other good goes up and if the price of one good goes down the price of the other good ges dow. This happens because of substitution of consumption in favor of the good which becomes cheaper: when price of good A increases, good B becomes relatively cheap and hence the demand for good B rises at the cost of reduction in demand for good

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