If a rise in the price of good B increases the demand for good A, then
A)A and B are substitutes.
B)A and B are complements.
C)the cross elasticity of demand between A and B is negative.
D)A is a resource used in the production of B.
E)the demand for A is price elastic.

Question

Quizplus · Accepted Answer

When the price of good B increases, consumers may switch to a cheaper substitute, which in this case is good A. Therefore, A and B are substitutes. If A and B were complements, an increase in the price of good B would decrease the demand for good A. Cross elasticity of demand would be positive if A and B were substitutes or negative if they were complements, but we cannot conclude what the magnitude of the cross elasticity is from this information. The other options are not relevant to the given scenario.

If a Rise in the Price of Good B Increases