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# Suppose the cross elasticity of demand for products A and B is +3.6 and for products C and D is −5.4.

 ▲ 0 ▼ ♥ 0 Suppose the cross elasticity of demand for products A and B is +3.6 and for products C and D is −5.4. What can you conclude about how products A and B are related? Products C and D?

Cross price elasticity refers to the percentage change in quantity demanded of a commodity with respect to the percentage change in the price of another commodity.

Cross price elasticity is positive for substitute goods. This implies that an increase in the price of one good increases the quantity demanded for another good or the consumer substitutes one good for another. Thus, for Products AA and BB, it can be said that for a 1 percent increase in the price of Good AA, the quantity demanded for Good BB increases by 3.6 percent.

Cross price elasticity is negative in the case of complementary goods that is when two goods are consumed together. An increase in the price of a commodity implies a decrease in demand for the other commodity. For Products CC and DD, a 1 percent increase in the price of Good CC decreases demand for Good DD by 5.4 percent.