If the cross elasticity of demand between goods A and B is negative, then
A)the demands for A and B are both price elastic.
B)the demands for A and B are both price inelastic.
C)A and B are complements.
D)A and B are substitutes.
E)A and B are independent goods.

Question

Quizplus · Accepted Answer

A negative cross elasticity of demand implies that the two goods are complements. This means that a change in the price of one good will result in a change in the demand for the other in the opposite direction. For example, if the price of coffee (good A) increases, the demand for cream (good B) will decrease. Therefore, the best choice is C.

If the Cross Elasticity of Demand Between Goods a and B