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JAMB Economics 2000 Question 8

Question 8

Elasticity

When commodity X sold for ₦25 per unit, 50 units of commodity Y were purchased. With an increase in the price of commodity X to ₦50 per unit, the demand for commodity Y fell to 20 units.
The two commodities can be classified as

  1. A.substitutes
  2. B.durable and non-durable
  3. C.intermediate and final
  4. D.complements.
Show the answer and explanation

Answer: D (complements.)

Explanation

A rise in the price of X reduced the demand for Y, so the cross elasticity is negative: the goods are used together (complements).