There Are Three Goods You Are Interested in Purchasing, X

question 59

Multiple Choice

There are three goods you are interested in purchasing, X, Y and Z. You notice that the price of Z has fallen. Given that the cross price elasticity between Z and Y is − 1.5; the cross price elasticity between Y and X is 3.0, and the cross price elasticity between Z and X is 0.50. It would make sense that:

• A) Z and X are complements; Y and X are substitutes.
• B) Y and X are substitutes; Y is complementary to Z.
• C) X and Z are unrelated; Y is complementary to X.
• D) X and Z are complements; Y and Z are substitutes.

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Definitions:

Resource

An asset or input used to produce goods and services, including time, money, labor, and natural resources.

Purely Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a homogeneous product, leading to price takers on both sides of the market.

Imperfectly Competitive Market

A market structure where individual sellers have some control over the price of their goods due to product differentiation or other factors.

Total Product

The overall quantity of output that a firm produces, usually in relation to a given input of labor or capital.