Question

Coffee and cream:_______. a. are complements. b. are both more inelastic in demand in the long run than in the short run. c. are both luxury goods. d. have a positive cross price elasticity of demand.

Answer 1

Answer:

Option (a) is correct.

Explanation:

Coffee and cream are complimentary goods because they are used together to satisfy a given want. Complimentary goods are having negative cross price elasticity of demand which means that if the price of coffee goes up then as a result the quantity demanded for cream goes down and if the price of coffee goes down then as a result the quantity demanded for cream goes up.