Question

If the cross-price elasticity of two goods is negative, then the two goods are a. inferior goods. b. normal goods. c. complements. d. necessities.

Answer 1

Option C. If the cross-price elasticity of two goods is negative, then the two goods are complements.

What is Cross-Price Elasticity?

• Cross-price elasticity measures how sensitive the demand of a product is over a shift of a corresponding product price.
• Often, in the market, some goods can relate to one another.
• This may mean a product’s price increase or decrease can positively or negatively affect the other product’s demand.
• A price increase of a complementary product will lead to lower demand or negative cross-price elasticity, and a price increase in a substitute product will lead to increased demand or a positive cross-price elasticity.
• Unrelated products have zero cross-price elasticity.
• For substitute products, an increase in the price of a substitute product increases the demand for the competing product.
• This is often because consumers always try to maximize utility.
• The less they spend on something, the higher the perceived satisfaction.

To know more about cross- price elasticity , refer:

brainly.com/question/15308590

#SPJ4