The cross-price demand elasticity of good X and good Y is equal to zero. The price...
The cross-price demand elasticity of good X and good Y is equal to zero. The price of good X goes up. Which of the following statements accurately describes what happens:
- A) Consumption of good Y goes up, because the goods are compliments
- B) Consumption of good Y goes up, because the goods are substitutes
- C) Consumption of good Y goes down, because the goods are compliments
- D) Consumption of good Y is unchanged
Homework Answers
ANSWER:
Since the cross price elasticity of good x and good y is zero, therefore both the goods are independent of each other and hence when the price of good x rises , the demand for good y will remain constant and so the correct answer is option d that is consumption of good y is unchanged.
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