Question

3. The demand for petrol rises from 500 to 600 Barrels when the price of a particular scooter is reduced from birr 25000 to birr.22000. Find out the cross elasticity of demand for the two. What is the nature of goods and relationship? The cross-price elasticity of demand is computed as:

Answer 1

A. cross price elasticity of demand will be negative

Explanation:

Complement goods are goods demanded together. If the demand for one good increases, the demand for the other good increases. If the price of one good rises, the demand for the other good falls.

Cross price elasticity of demand measures the responsiveness of quantity demanded of one good to changes in price of another good.

The cross price elasticity for complements is negative because a rise in price for one good leads to fall in the quantity demanded of the other good.

I hope my answer helps you.

Step-by-step explanation: