Question

Complementary goods have a _______________ cross-price elasticity: as the price of one good increases, the demand for the second good decreases.

Answer 1

Answer:

negative

Explanation:

Complementary goods have a negative cross-price elasticity because the increase in price of one tends to a weak or fall in consumer demand of the second. For instance, a hike in petrol will lead to a  decrease in consumer demand for cars thereby giving rise to alternatives to these goods (most likely, there would be a surge in subway or rail patronage)