During the 1970s, OPECʹs output restrictions caused gasoline prices to increase sharply. Coincidentally, demand for gas-guzzling cars fell. A likely explanation for these observations is that gasoline and cars had a
Elasticity of demand that was .
A) cross; negative
B) cross; positive
C) income; negative
D) income; positive
E) price; negative

Question

Quizplus · Accepted Answer

Gasoline and cars are complementary goods, so when the price of gasoline increased, the demand for gas-guzzling cars decreased, indicating a negative cross elasticity of demand.

During the 1970s, OPECʹs Output Restrictions Caused Gasoline Prices to Increase