CSEET · Economic and Business Environment · Basics of Demand and Supply and Forms of Market Competition
The cross elasticity of demand between two goods is found to be +1.4. How are the goods related?
The goods are substitutes. A positive cross elasticity of demand means that when the price of one good rises, demand for the other rises too, as consumers switch between them. Complements have a negative cross elasticity, while unrelated goods have a value close to zero.
- AComplements
- BSubstitutesCorrect
- CUnrelated goods
- DGiffen goods
Explanation
A positive cross elasticity means a rise in the price of one good increases demand for the other, which is how substitutes behave. Complements show negative cross elasticity, and unrelated goods show a value near zero.
Did you get it right without looking?
One question tells you little. A timed set on Basics of Demand and Supply and Forms of Market Competition shows your real accuracy, how long you take and where you lose marks.
More Basics of Demand and Supply and Forms of Market Competition questions
- A cartel is best described as:
- Coffee and tea are generally treated as substitutes. If the price of coffee rises substantially, what is the most likely effect on the marke…
- When the price of a commodity falls from Rs 50 to Rs 40 per unit and the quantity demanded rises from 100 units to 130 units, what is the pr…
- A firm in monopolistic competition faces a demand curve that is:
- A profit-maximising monopolist is producing where marginal cost (MC) is ₹30 and marginal revenue (MR) is ₹50 at the current output. Which ac…
- According to the law of supply, when the price of a commodity rises and other factors remain unchanged, what happens to the quantity supplie…