If a Lower Price for Good X Increases the Demand

question 78

Multiple Choice

If a lower price for good X increases the demand for good Y, the cross elasticity value for the two goods is

• A) positive and greater than one.
• B) positive and less than one.
• C) negative.
• D) equal to zero.
• E) possibly negative, positive or zero, but there is not enough information to decide.

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Definitions:

Utility Function

A mathematical representation that shows the relationship between the overall satisfaction or happiness a person derives from consuming different bundles of goods and services.

Pareto Optimal

An allocation scenario where it is impracticable to enhance the situation of any entity or preference measure without causing a decline for at least one other entity or benchmark.

Endowment

The stock of assets or resources provided to an individual, institution, or country, typically used to generate income or contribute to wealth.

Pure Exchange Economy

An economic model where no production occurs and individuals or entities trade pre-existing goods and services among each other.