Question

If the price of Product E decreasing by 2% causes its quantity demanded to increase by 14% and the quantity demanded for Product F to increase by 17%, what is the cross-price elasticity of demand? Round your answer to one decimal place. What is the relationship between these goods? A) no relationship
B) complements
C) substitutes

Answer 1

Answer:

B) complements

Explanation:

The cross elasticity shows a relationship between the percentage change in quantity demanded with the percentage change in the price.

In case of the substitute goods, the relation between the price and the quantity demanded is positive that means if the price of goods increased than the quantity demanded is also increased

And, In case of the complementary goods, the relation between the price and the quantity demanded is  negative that means if the price of goods increased than the quantity demanded is decreased

According to the given situation, the most appropriate option is B.