The crossprice elasticity of iPhones and Apps is 08 An incre

The cross-price elasticity of iPhones and Apps is -0.8. An increase in the price of iPhones will:

A.) Decrease the demand for APPS

B.) Increase the demand for APPS

C.) Decrease the supply for Apps.

D.) Increase the supply of Apps.

Solution

Ans.B)The cross-price elasticity of iPhones and Apps is -0.8.An increase in the price of iPhone will increase the demand for Apps.

Complementary goods will have a negative cross elasticity of demand. If the price of one good increases, demand for both complementary goods will fall. The more intrinsically linked the goods are, the higher will be the cross elasticity of demand.

If they are weak complementary goods then there will be a low cross elasticity of demand.