Whether a Cross-Price Elasticity of Demand Is Positive or Negative

question 72

Multiple Choice

Whether a cross-price elasticity of demand is positive or negative indicates whether the:

• A) goods are substitutes or complements.
• B) elasticities are reported in absolute value.
• C) demands are elastic or inelastic.
• D) goods are a luxury or a necessity.

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Definitions:

Demand Schedule

A list or table showing how much of a good or service consumers will want to buy at different prices.

Elasticity

The degree to which the demand or supply of a product responds to changes in price or other factors, indicating how adjustments in price can influence market dynamics.

Income Elasticity

A measure of how much the demand for a good will change in response to a change in consumers' income.

Inferior Good

An inferior good is a type of good whose demand decreases when consumer income rises, in contrast to normal goods, whose demand increases with rising incomes.