Question

If a 1 percent decrease in the price of tennis rackets increases the quantity demanded of tennis balls 20 ​percent, the​ cross-price elasticity of demand is nothing. ​(Enter your response rounded to two decimal places and include a minus sign if necessary.​) In this​ case, tennis rackets and tennis balls are considered to be.

Answer 1

Answer

-20

complement goods

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$Cross\ price\ elasticity\ of\ demand=\frac{\%\ change\ in\ quantity\ of\ the\ good}{\%\ change\ in\ price\ of\ other\ good}=\frac{20}{-1}=-20$

The cross-price elasticity of demand is -20 between the goods, The elasticity is negative so the goods are complements as the decrease in the price of one increases demand for other and vice verse.