If the cross-price elasticity of demand is 1.25, then the two goods are:
A) complements
B) inferior goods
C) normal goods
D) substitutes

Name: If the cross-price elasticity of demand is 1.25, then the two goods are: A) complements B) inferior goods C) normal goods D) substitutes
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Question

Quizplus · Accepted Answer

A cross-price elasticity of demand of 1.25 indicates that the two goods are substitutes, meaning that an increase in the price of one good will lead to an increase in the demand for the other good.

If the Cross-Price Elasticity of Demand Is 1