If the cross-price elasticity between two goods is negative the two goods are likely to be ?
Correct answer: B. complements
- A. substitutes
- B. complements
- C. necessities
- D. luxuries
Explanation
A negative cross-price elasticity means that an increase in the price of one good reduces demand for the other. This inverse relationship is characteristic of complementary goods, such as cars and petrol.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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