If the cross-price elasticity of demand for Widgets and Twingers is negative, this meansthe two goods areO InferiorO NormalO ComplementsSubstitutes

An inferior good is the one whose demand decreases with the increase in income and with the fall in…

Answered: If the cross-price elasticity of demand…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the cross-price elasticity of demand for Widgets and Twingers is negative, this means
the two goods are
O Inferior
O Normal
O Complements
Substitutes

Expert Solution

Step 1

An inferior good is the one whose demand decreases with the increase in income and with the fall in income the demand for these goods increases. This is because if the income increases, individuals can afford to forego the cheap alternative and instead will buy high-quality goods. But, if the income of the consumer is low then he or she will prefer to buy cheap products.
Substitute goods are goods that can be used as alternates for the same purpose. Soo, these goods represent the choices of the consumers.
Normal goods are the goods for which demand rises when income increases these goods are directly related to the income of the consumers.
Complements are the goods whose demand increases with the demand of its closely associated good which is its complement. When two goods are used together then they are known as complements.

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