11 Questions
Which type of goods have a Cross-Price Elasticity of Demand (XED) equal to zero?
Unrelated goods
What happens to the Quantity Demanded (QD) of good Y if the price of a weak complement good X falls significantly?
Small increase in QD of Y
Why are firms interested in understanding Cross-Price Elasticity of Demand (XED)?
To determine how many competitors they have
Which situation describes close substitutes?
Small increase in the price of X leads to a large increase in QD of Y
In the context of substitutes, what does an upward-sloping demand curve indicate?
Positive Cross-Price Elasticity of Demand (XED)
What is the price elasticity of demand (PED) for a price elastic good?
Greater than 1
In the context of luxury goods, what does a YED greater than 1 indicate?
Demand increases more than proportionately with an increase in income
What does a price inelastic good signify?
The demand is relatively unresponsive to a change in price
When two goods are complements, what does a negative cross elasticity of demand (XED) indicate?
Increase in the price of one good leads to a decrease in demand for the other
What is the significance of a YED less than 1 for a normal good?
The good is inferior
For close complements, what happens when the price of one good decreases?
Quantity demanded for one good increases and the other decreases
Learn about price elasticity of demand in microeconomics with this quiz focusing on the responsiveness of demand to a change in price. Explore the formula and characteristics of price elastic goods.
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