CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

If the cross elasticity of demand is -2, ______
A. the products are substitutes and demand is cross-price elastic.
B. the products are substitutes and demand is cross-price inelastic.
C. the products are complements and demand is cross-price elastic.
Explanation: This means that, for example, a 10% increase in the price of one product reduces the quantity demanded of another product by 20%; the products are complements and the cross-price elasticity is elastic (because the effect on quantity demanded is greater than the change in price in percentage).

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