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Suppose that the cross price elasticity of demand between good X and good Y is minus−1.55. This indicates that the two goods are

Respuesta :

Answer:

Complementary goods

Explanation:

Cross price elasticity of demand between two goods, X and Y

= [tex]\frac{Percentage Change in Demand of X}{Percentage Change in Price of Y}[/tex]

For the cross price elasticity to be negative at -1.55, it means

  • the higher the price of Y (which will naturally translate to a lower demand for Y), the less the quantity of X that is demanded, and
  • the lower the price of Y  (translating to a higher demand for Y), the less the quantity of X that is demanded.

Thus, demand for both X and Y move in the same direction meaning they are complementary goods and are used together.

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