question archive If the cross elasticity of demand between pencils and backpacks is 0, then the two goods are a
If the cross elasticity of demand between pencils and backpacks is 0, then the two goods are a
Subject:EconomicsPrice:2.88 Bought3
If the cross elasticity of demand between pencils and backpacks is 0, then the two goods are
a. perfectly inelastic.
b. substitutes.
c. unrelated.
d. complements.
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The correct answer to the given question is option c. unrelated.
The cross price elasticity between two products is ascertained by dividing the percentage change in quantity demanded for one product with the percentage change in price of a related product. If the cross price elasticity is negative between two products then these products are said to be complement of each other and if the cross price elasticity is positive then these products are called as substitutes of each other.
In the given scenario, since the cross price elasticity between pencils and backpacks is 0, it can be inferred that the two goods are unrelated to each other.
