Author Question: If the cross-price elasticity of demand between good x and good y is 0.4, then a. the demand for ... (Read 129 times)

kaid0807 · **on:** Jul 1, 2018

If the cross-price elasticity of demand between good x and good y is 0.4, then
a. the demand for good x is highly responsive to changes in the price of good y
b. a 10 percent increase in the price of good y leads to a 0.4 percent increase in the quantity demanded of good x
c. a 10 percent decrease in the price of good y leads to a 4 percent decrease in the demand for good y
d. good x and good y are complements
e. good x is a normal good and good y is an inferior good

Question 2

A 10 percent increase in the price of root beer causes a 5 percent increase in the quantity demanded of orange soda. This means that
a. root beer and orange soda are substitutes
b. root beer and orange soda are complements
c. the cross-price elasticity of demand is elastic
d. the cross-price elasticity of demand is equal to 2
e. the cross-price elasticity of demand is equal to -2