When two goods have positive cross elasticities of demand and positive income elasticities, they are:
A)Normal and substitutes.
B)Normal and complements.
C)Inferior and substitutes.
D)Inferior and complements.

Question

When two goods have positive cross elasticities of demand and positive income elasticities, they are:
A)​Normal and substitutes.
B)​Normal and complements.
C)​Inferior and substitutes.
D)​Inferior and complements.

Quizplus · Accepted Answer

Positive cross elasticities of demand indicate that the two goods are substitutes, while positive income elasticities indicate that they are normal goods. Therefore, the correct choice is A - normal and substitutes.

When Two Goods Have Positive Cross Elasticities of Demand and Positive