If the cross-price elasticity of demand is equal to -0.5, it can be concluded that:
A) this good is inferior.
B) the two goods are complements.
C) the two goods are substitutes.
D) the good has many close substitutes.

Question

Quizplus · Accepted Answer

A negative cross-price elasticity of demand indicates that as the price of one good increases, the demand for the other good decreases, which is characteristic of complementary goods.

If the Cross-Price Elasticity of Demand Is Equal to -0