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If the cross elasticity of demand for computers with respect to the price of a DVD is negative, then computers and DVDs are ______.

a. complements
b. substitutes

1 Answer

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Final answer:

If the cross elasticity of demand for computers with respect to the price of a DVD is negative, then computers and DVDs are complements. A higher price for DVDs will lead to a decrease in the quantity demanded for computers.

Step-by-step explanation:

If the cross elasticity of demand for computers with respect to the price of a DVD is negative, then computers and DVDs are complements. Complement goods have negative cross-price elasticities: if good A is a complement for good B, like coffee and sugar, then a higher price for B will mean a decrease in the quantity demanded of A.

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