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The price elasticity of demand (PED) of good A is negative
Its income elasticity of demand (IED) is positive
And its cross elasticity of demand (XED) with respect to good X is negativeWhat is the natureof good A?
A A good bought for purposes of ostentation, complementary to X
B An inferior good, substitute for X
C A normal good, complementary to XI would go for option A as it has a positive income elasticity therefor it’s a luxury staff
but the answer says correct answer is option C
could you please make it clear for me?
PED negative: this is normal: as price goes up, demand goes down. Ostentation-goods might show a positive PED so the more expensive they are, the more you can show off so you buy more.
IED positive: this is normal: as income goes up, demand goes up.
XED negative: as the price of X goes up the demand for A goes down, so they are complements (like petrol and cars)
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