An electronics manufacturer notices that when the price of premium wireless headphones (Good $X$ ) increases by 15%, the quantity demanded of a rival brand's wireless earbuds (Good $Y$ ) increases by 12%. Simultaneously, a 5% increase in consumer real incomes leads to a 3% decrease in the quantity demanded of Good $Y$ .

Which of the following correctly identifies the relationship between Good $X\,$ and Good $Y$ , and classifies Good $Y$ ?

Good $X$ and Good $Y$ are substitutes with a cross elasticity of demand ( $X E D$ ) of $+ 1.25$ , and Good $Y$ is a normal good.

Good $X$ and Good $Y$ are substitutes with a cross elasticity of demand ( $X E D$ ) of $+ 0.8$ , and Good $Y$ is an inferior good.

Good $X$ and Good $Y$ are complements with a cross elasticity of demand ( $X E D$ ) of $- 0.8$ , and Good $Y$ is an inferior good.

Good $X$ and Good $Y$ are complements with a cross elasticity of demand ( $X E D$ ) of $- 1.25$ , and Good $Y$ is a normal good.

Which of the following correctly identifies the relationship between Good $X\,$ and Good $Y$ , and classifies Good $Y$ ?

Good $X$ and Good $Y$ are substitutes with a cross elasticity of demand ( $X E D$ ) of $+ 1.25$ , and Good $Y$ is a normal good.

Good $X$ and Good $Y$ are substitutes with a cross elasticity of demand ( $X E D$ ) of $+ 0.8$ , and Good $Y$ is an inferior good.

Good $X$ and Good $Y$ are complements with a cross elasticity of demand ( $X E D$ ) of $- 0.8$ , and Good $Y$ is an inferior good.

Good $X$ and Good $Y$ are complements with a cross elasticity of demand ( $X E D$ ) of $- 1.25$ , and Good $Y$ is a normal good.

1.3 Price determination in a competitive market

Question 87

Markscheme

1.3 Price determination in a competitive market

Question 87

Markscheme

1.3 Price determination in a competitive market

Question 87

1.3 Price determination in a competitive market Questions

1.3 Price determination in a competitive market

Question 87

1.3 Price determination in a competitive market Questions