WBCS.LIVE practice question

If the cross-price elasticity of demand between two goods is negative, what are the goods?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. Substitute goods
  2. Giffen goods
  3. Independent goods
  4. Complementary goods

Correct answer and explanation

Correct answer: Complementary goods

Explanation: āœ… Correct Answer: D) Complementary goods šŸ“š Explanation: Cross-price elasticity of demand measures the responsiveness of the quantity demanded for one good to a change in the price of another good. A negative cross elasticity means that as the price of one good increases, the demand for the other good decreases. This inverse relationship strictly characterizes complementary goods, such as cars and petrol, which are typically consumed together.