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Economics miscellaneous

  1. If two commodities are complements, then their cross-price elasticity is
    1. zero
    2. positive
    3. negative
    4. imaginary number
Correct Option: C

In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good. A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products.



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