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

question 283

Multiple Choice

If the cross-price elasticity of demand for two goods is 1.25,then

• A)the two goods are luxuries.
• B)the two goods are substitutes.
• C)one of the goods is normal and the other good is inferior.
• D)the demand for one of the goods conforms to the law of demand,but the demand for the other good violates the law of demand.

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Definitions:

Production Possibilities

A curve representing all possible combinations of maximum outputs that could be produced with a fixed amount of resources.

Consumption Possibilities

The range of goods and services that can be consumed given a consumer's income and prices.

Physical Capital

Tangible assets used in the production of goods and services, such as machinery, buildings, and equipment.

Production Possibilities Curve

A graph that shows the different quantities of two goods that an economy can produce using all of its resources efficiently.