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CB2 - Oct2017 - Qus 4

B

Bharti Singla

Senior Member
Good X has a cross price elasticity of demand with respect to Good Y which is equal to minus unity (-1). Good X is which of the following?
A. Perfect substitute
B. Imperfect substitute
C. Perfect complement
D. Imperfect complement

The ans. Is C or D.
I understand that these are complementary goods. But how it can be both perfect or imperfect? As the elasticity is -1, it should be unit, not perfect or imperfect.
Can anyone please elaborate?

Thanks!
 
Hi Bharti

You are right that they are complementary goods, and that the question doesn't give enough information to determine if they are perfect complements (i.e. like a left shoe and a right shoe). The examiners accepted both C and D as correct answers in this case.

Dave
 
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