-
Cross elasticity of demand between petrol and car is
-
- infinite
- positive
- zero
- negative
- infinite
Correct Option: D
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. For example, if, in response to a 10% increase in the price of fuel, the demand of new cars that are fuel inefficient decreased by 20%, the cross elasticity of demand would be -2. A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products.