To say that two goods are complements, their cross price elasticities of demand should be:
A) less than zero.
B) equal to zero.
C) positive, yet almost equal to zero.
D) greater than zero.

Question

Quizplus · Accepted Answer

Cross price elasticities of demand measure the responsiveness of the demand of one good to changes in the price of another good. Complementary goods have a negative cross price elasticity of demand, which means that when the price of one good increases, the demand for the other good will decrease. Therefore, the correct answer is A) less than zero.

To Say That Two Goods Are Complements, Their Cross Price