If the cross-price elasticity of two goods is positive, then the two goods are

Question

Xiomara Mullins

Business

9 June, 06:54

If the cross-price elasticity of two goods is positive, then the two goods are

+2

Answers (2)

Know the Answer?

Bruce Blackburn · Answer 1

If the cross price elasticity of two goods is positive, then the two goods are Substitute goods.

Explanation:

In Economics, substitute goods are those goods for which the cross price elasticity of demand is positive. If the price of one good increases the consumer or buyer demand for the other or substitute good also increases and vise versa. Examples of complement goods can be rice and bread or coke and Pepsi. People usually substitute these above-mentioned as they are similar in certain characteristics, tastes and features. Therefore, as the price of rice increases, most of the rational consumers will switch to bread to get their regular carbohydrate thereby increasing consumer demand for bread. The same consumer psychology applies in the case of Coke and Pepsi.

Bonnie · Answer 2

Answer: Then the two goods are substitutes.

Explanation:

Substitute goods are the goods which are similar to one another. If one good is not available the customer moves on with the substitute goods. If the consumer hold one good in excess then the demand for the other good decreases.

If the price of one good increases then the demand for other good increases this is the cross price elasticity of goods. Here the demand of the goods is the responsiveness for the change in price of other product.