Question

Which of the following statement(s) is/are correct?

[1] The cross elasticity of demand for complements is always positive.

[2] If two products are substitutes, their cross elasticity of demand is always negative.

[3] If two products are complements, their cross elasticity of demand will always be

negative.

[4] The cross elasticity of butter and margarine can be expected to be negative.

Answer 1

If two products are complements, their cross elasticity of demand will always be negative. All other statements are incorrect.

So, the correct answer is [3].