if the coefficient of cross elasticity of demand for goods Y and Z is positive,...
ECONOMICS
WAEC 2017
if the coefficient of cross elasticity of demand for goods Y and Z is positive, the two goods are?
- A. complements
- B. substitutes
- C. luxurious
- D. inferior
Correct Answer: B. substitutes
Explanation
A positive cross-price elasticity value indicates that the two goods are substitutes. Two goods that complement each other have a negative cross elasticity of demand: as the price of goodY rises, the demand for good X falls.
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