QuestionJune 6, 2025

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

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

Solution
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Answer

Coffee and cream are complements. They have a negative cross price elasticity of demand. Explanation 1. Identify the nature of goods Coffee and cream are complements, meaning they are often consumed together. 2. Analyze cross price elasticity Complements typically have a negative cross price elasticity of demand because an increase in the price of one leads to a decrease in the demand for the other. 3. Evaluate elasticity over time Luxury goods tend to be more elastic in demand in the long run than in the short run due to consumers' ability to adjust their consumption patterns over time.

Explanation

1. Identify the nature of goods<br /> Coffee and cream are complements, meaning they are often consumed together.<br /><br />2. Analyze cross price elasticity<br /> Complements typically have a negative cross price elasticity of demand because an increase in the price of one leads to a decrease in the demand for the other.<br /><br />3. Evaluate elasticity over time<br /> Luxury goods tend to be more elastic in demand in the long run than in the short run due to consumers' ability to adjust their consumption patterns over time.
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