Cross elasticity of demand is zero means the two goods are

Cross elasticity of demand is zero means the two goods are

• A. Substitutes.
• B. Complements.
• C. Unrelated.
• D. Normal goods.

Answer: (C)

Cross elasticity of demand shows how much the quantity demanded of one good changes when the price of another good changes. If that elasticity is zero, the two goods do not affect each other’s demand at all, so they are unrelated. If they were substitutes, a price rise for one would boost demand for the other, giving a positive cross elasticity, not zero. If they were complements, a price rise for one would reduce demand for the other, giving a negative cross elasticity, not zero. The term normal goods relates to how demand changes with income, not with the price of another good.

Cross elasticity of demand shows how much the quantity demanded of one good changes when the price of another good changes. If that elasticity is zero, the two goods do not affect each other’s demand at all, so they are unrelated.

If they were substitutes, a price rise for one would boost demand for the other, giving a positive cross elasticity, not zero. If they were complements, a price rise for one would reduce demand for the other, giving a negative cross elasticity, not zero. The term normal goods relates to how demand changes with income, not with the price of another good.