Question

If goods X and Y are COMPLEMENTS, the which of the following could be the value of cross price elasticity of demand?



0

1

-1

All of the above could be the value of cross price elasticity of demand.

Answer 1

Answer:

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Answer 2

If goods X and Y are complements, the value of the cross-price elasticity of demand would be -1.

• When two goods are complementary to each other the demand for the product will fall when the price of the other product rises.
• Due to this, there will be a negative cross-price elasticity of demand between the two goods.
• This is also because the price of one good and the demand of the other good is inverse proportional to each other.

Hence, the answer is -1