- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 2. Elasticities of Demand

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**CFA Practice Question**

Which of these ratios is (are) always negative?

II. The cross elasticity of demand for a complement

III. The income elasticity of demand for an inferior good

IV. The price elasticity of supply

I. The price elasticity of demand

II. The cross elasticity of demand for a complement

III. The income elasticity of demand for an inferior good

IV. The price elasticity of supply

A. I only

B. I, II and III

C. I and II

**Explanation:**The price elasticity of supply is always positive.

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**User Contributed Comments**
5

User |
Comment |
---|---|

copus |
think of elasticities in terms of the slope of the SS and DD curves. The DD curve is negatively sloped and therefore the price elasticity of supply is negative. The SS curve is positively sloped and therefore the price elascticity of supply is positive. |

srh011 |
You mean the price elasticity of demand is negative I think. |

gill15 |
What if its a veblen good or giffen --- they have upward sloping demand curves then price elasticity would not be negative anybody |

farhan92 |
@gill veblen good - p increase q increases therefore positive elasticity -thats how i see it anyway someone correct me if i am wrong here |

jamcarr27 |
can elasticities not be equal to 0, therefore not negative? |