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Questions and Answers
Which type of goods have a Cross-Price Elasticity of Demand (XED) equal to zero?
Which type of goods have a Cross-Price Elasticity of Demand (XED) equal to zero?
- Substitute goods
- Unrelated goods (correct)
- Inferior goods
- Complementary goods
What happens to the Quantity Demanded (QD) of good Y if the price of a weak complement good X falls significantly?
What happens to the Quantity Demanded (QD) of good Y if the price of a weak complement good X falls significantly?
- No change in QD of Y
- Large increase in QD of Y
- Decrease in QD of Y
- Small increase in QD of Y (correct)
Why are firms interested in understanding Cross-Price Elasticity of Demand (XED)?
Why are firms interested in understanding Cross-Price Elasticity of Demand (XED)?
- To assess the impact of their advertising campaigns
- To predict future demand trends accurately
- To monitor their production costs
- To determine how many competitors they have (correct)
Which situation describes close substitutes?
Which situation describes close substitutes?
In the context of substitutes, what does an upward-sloping demand curve indicate?
In the context of substitutes, what does an upward-sloping demand curve indicate?
What is the price elasticity of demand (PED) for a price elastic good?
What is the price elasticity of demand (PED) for a price elastic good?
In the context of luxury goods, what does a YED greater than 1 indicate?
In the context of luxury goods, what does a YED greater than 1 indicate?
What does a price inelastic good signify?
What does a price inelastic good signify?
When two goods are complements, what does a negative cross elasticity of demand (XED) indicate?
When two goods are complements, what does a negative cross elasticity of demand (XED) indicate?
What is the significance of a YED less than 1 for a normal good?
What is the significance of a YED less than 1 for a normal good?
For close complements, what happens when the price of one good decreases?
For close complements, what happens when the price of one good decreases?
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