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      Question

      An economist calculated the cross-price

      elasticity of demand for nicknacks and gizmos and got -0.5. What can she conclude about the relationship between these two goods based on this elasticity?
      A they are unrelated goods Correct Answer Incorrect Answer
      B they are substitutes Correct Answer Incorrect Answer
      C they are complements Correct Answer Incorrect Answer
      D they are normal goods Correct Answer Incorrect Answer

      Solution

      They are complements because cross-price elasticity is negative.

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