If the Cross-Price Elasticity of Demand Between Good X and Good

question 244

Multiple Choice

If the cross-price elasticity of demand between good x and good y is 0.4, then

• A)the demand for good x is highly responsive to changes in the price of good y
• B)a 10 percent increase in the price of good y leads to a 0.4 percent increase in the quantity demanded of good x
• C)a 10 percent decrease in the price of good y leads to a 4 percent decrease in the demand for good y
• D)good x and good y are complements
• E)good x is a normal good and good y is an inferior good

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Definitions:

Economically Inefficient

A situation where resources are not allocated optimally, leading to waste or the inability to maximize value or output.

Nonrivalry

The idea that one person’s benefit from a certain good does not reduce the benefit available to others; a characteristic of a public good.

Consumption

The use of goods and services by households, often considered a primary economic indicator.

Rivals

Competitors within a market, vying for the same customers or resources in an effort to achieve economic or strategic advantages.