The cross-price elasticity of demand measures the percentage change in the quantity of a good demanded when the price of a different good changes by 1 % . The income elasticity of demand measures the percentage change in the quantity of a good demanded when the income of buyers changes by 1 %. a. What sign might you expect the cross-price elasticity to have if the two goods are shampoo and conditioner? Why?

Respuesta :

Answer:

Negative sign

Explanation:

As the problem states, the cross-price elasticity measures how the quantity demanded of good A changes when the price of good B changes by 1%.

It is common that people use shampoo and conditioner, but not only conditioner(maybe only shampoo, but for this example let's suppose that most of the time, people do not use only one) . We can affirm that they are complementary goods. The cross-price elasticity of shampoo and conditioner should be negative because if the price of one increases (for example conditioner), the quantity demanded for the other, (shampoo), will decrease.

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