Positive cross elasticities suggest that goods are ____ and negative cross-elasticities that goods are ?
Correct answer: C. substitutes complements
- A. substitutes inferior
- B. normal, complements
- C. substitutes complements
- D. normal, inferior
Explanation
A positive cross-price elasticity means the goods are substitutes, since a rise in the price of one increases demand for the other. A negative cross-price elasticity identifies complements, such as cars and petrol.
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