If the value of the cross elasticity of demand is negative, the two goods are
A) complementary goods.
B) substitute goods.
C) normal goods.
D) inferior goods.

Question

Quizplus · Accepted Answer

The cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. When the value of the cross elasticity of demand is negative, it indicates that the two goods are complements, meaning that they are typically consumed together, and a change in the price of one good will result in an opposite change in the quantity demanded of the other good. For example, if the price of coffee increases, the demand for coffee filters (its complement) will decrease.

If the Value of the Cross Elasticity of Demand Is