If the Cross-Elasticity of Demand for Two Goods Is Positive

question 138

Multiple Choice

If the cross-elasticity of demand for two goods is positive, this means that the goods are:

• A) normal goods.
• B) inferior goods.
• C) substitutes.
• D) complements.

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Definitions:

Net Demand

The difference between total market demand and market supply, representing the excess demand or shortage in the market.

Utility Function

An economic concept expressing how different combinations of goods or services yield different levels of utility or satisfaction to an individual.

Endowment

The initial allocation of income, goods, or resources that individuals or firms possess in an economy, often impacting their trading capabilities and outcomes in markets.

Price

The amount of money required to purchase a good or service, reflecting its value in a market economy.