The cross price elasticity of demand helps determine, empirically, whether a good is
A)Normal or inferior
B)A necessity or a luxury
C)A complement or a substitute to another good
D)Unit elastic or perfectly inelastic in its own demand.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. If the cross-price elasticity is positive, the two goods are substitutes, and if it is negative, they are complements. Therefore, the cross-price elasticity helps determine whether a good is a complement or a substitute to another good.

The Cross Price Elasticity of Demand Helps Determine, Empirically, Whether