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

Quizplus · Accepted Answer

Negative cross elasticities of demand indicate that the goods are complements, meaning that an increase in the price of one good leads to a decrease in the demand for the other. Negative income elasticities indicate that the goods are inferior, meaning that an increase in income leads to a decrease in the demand for these goods.

When Two Goods Have Negative Cross Elasticities of Demand and Negative