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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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