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When cross elasticity of demand is a large positive number, one can conclude that
- AThe good is normal
- BThe good is inferior
- CThe good is a substitute
- DThe good is complement
Correct answer: C
Discussion 1
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CCommunity
The good is a substitute
When cross elasticity of demand is a large positive number, one can conclude that the good is complement. Two goods that complement each other have a negative cross elasticity of demand: as the price of good Y rises, the demand for good X falls.
When cross elasticity of demand is a large positive number, one can conclude that the good is complement. Two goods that complement each other have a negative cross elasticity of demand: as the price of good Y rises, the demand for good X falls.