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Economics (AS & A Level) · May / June 2022 · Paper 14 · Question 12

9708Price elasticity, income elasticity and cross elasticity of demand

When the price of good X rises, total spending on good X rises, but the demand for good Y falls. What can be concluded about good X and good Y?

  1. Aprice elasticity of demand for good X > 1; cross-elasticity of demand for good Y with respect to the price of good X > 0
  2. Bprice elasticity of demand for good X > 1; cross-elasticity of demand for good Y with respect to the price of good X < 0
  3. Cprice elasticity of demand for good X < 1; cross-elasticity of demand for good Y with respect to the price of good X > 0
  4. Dprice elasticity of demand for good X < 1; cross-elasticity of demand for good Y with respect to the price of good X < 0

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Correct answer: D. price elasticity of demand for good X < 1; cross-elasticity of demand for good Y with respect to the price of good X < 0

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