If the cross- price elasticity between Goods X and Y is - 2.0, the goods are _________ _ and an increase in the price of Good X will cause a(n)_________ in the quantity demanded of Good Y.
A)complements; decrease
B)substitutes; decrease
C)complements; increase
D)substitutes; increase

Question

Quizplus · Accepted Answer

The negative cross-price elasticity indicates that Goods X and Y are complements, meaning an increase in the price of Good X will lead to a decrease in the quantity demanded of Good Y.

If the Cross- Price Elasticity Between Goods X and Y