WAEC Economics 2017 Paper

Concept:Positive cross elasticity of demand shows that an increase in the price of one good raises the demand for the other.Explanation:Cross elasticity of demand is measured as:$$E_c = \frac{\%\Delta Q_d^Z}{\%\Delta P_Y}$$Here, $Q_d^Z$ is the quantity demanded of good Z and $P_Y$ is the price of good Y.When $E_c$ is positive, a rise in the price of Y causes the quantity demanded of Z to rise.This happens because consumers switch from Y to Z when Y becomes costlier.Such goods are known as substitutes.On the other hand, complementary goods give a negative cross elasticity because their demand moves in opposite directions to the price change.Answer:B. substitutes