If the Cross Elasticity of Demand Between Goods a and B

question 5

Multiple Choice

If the cross elasticity of demand between goods A and B is negative, then

• A)the demands for A and B are both price elastic.
• B)the demands for A and B are both price inelastic.
• C)A and B are complements.
• D)A and B are substitutes.
• E)A and B are independent goods.

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Definitions:

Comparative Advantage

An economic principle that posits countries, individuals, or entities gain and benefit from trading if they specialize in producing goods and services for which they have a lower opportunity cost.

Comparative Advantage

The expertise of an individual, a corporation, or a sovereign state to create a commodity or a service that bears a lower opportunity cost than that of competing entities.

Relative Costs

The cost of one good or service compared to another, often considered in terms of the opportunity cost of choosing one option over another.