If two commodities are complements, then their cross-price elasticity ...
Negative
When two commodities are complements, it means that they are consumed together or used in conjunction with each other. For example, bread and butter are complements, as people often consume them together. Similarly, cars and gasoline are complements, as cars require gasoline to operate.
The cross-price elasticity measures the responsiveness of the quantity demanded of one commodity to a change in the price of another commodity. When two commodities are complements, an increase in the price of one commodity will generally lead to a decrease in the quantity demanded of the other commodity, and vice versa.
This relationship between price and quantity demanded is reflected in the cross-price elasticity. If the cross-price elasticity is negative, it indicates that an increase in the price of one commodity leads to a decrease in the quantity demanded of the other commodity, and vice versa. This negative relationship is consistent with the complementary nature of the two commodities.
For example, if the price of cars increases, people may reduce their demand for cars, which will in turn decrease the demand for gasoline. Similarly, if the price of gasoline increases, people may reduce their demand for gasoline, which will decrease the demand for cars.
Therefore, the correct answer is option C: Negative. The cross-price elasticity between two complementary commodities is negative, reflecting the inverse relationship between their prices and quantities demanded.
If two commodities are complements, then their cross-price elasticity ...
The cross-price elasticity of demand measures the percentage change in the demand for one good that results from a one percent change in the quantity demanded of a second good. If two goods are very close complements, then the cross-price elasticity of demand between the two goods will be large and negative.