Two goods are defined as being complementary products if:(a) Their respective PEDs are both greater than one;(b) Their respective YEDs are both equal;(c) Their respective PEDs and YEDs are negative;(d) Their XPED is negative
Question
Two goods are defined as being complementary products if:(a) Their respective PEDs are both greater than one;(b) Their respective YEDs are both equal;(c) Their respective PEDs and YEDs are negative;(d) Their XPED is negative
Solution
Two goods are defined as being complementary products if their Cross Price Elasticity of Demand (XPED) is negative. This is because a negative XPED indicates that as the price of one good increases, the demand for the other good decreases, suggesting that the two goods are used together or complement each other.
So, the correct answer is (d) Their XPED is negative.
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