The cross elasticity between two goods, X and Y, is positive. From this, we can conclude that goods X and Y are:
A) substitute goods.
B) complementary goods.
C) unrelated goods.
D) inferior goods.

Question

Quizplus · Accepted Answer

Positive cross elasticity means that as the price of one of the goods (X) increases, the demand for the other good (Y) increases as well. This is characteristic of substitute goods, as consumers switch to the cheaper alternative when one becomes relatively more expensive.

The Cross Elasticity Between Two Goods, X and Y, Is