Question : Which of the following goods is likely to have a negative cross elasticity of demand with bicycles?
Option 1: Bicycle helmets
Option 2: Bicycle repair services
Option 3: Motorcycle helmets
Option 4: Roller skates
Correct Answer: Motorcycle helmets
Solution : The correct answer is (c) Motorcycle helmets
Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to changes in the price of another good. If the cross elasticity of demand is negative, it indicates that the two goods are complements, meaning that an increase in the price of one good leads to a decrease in the quantity demanded of the other.
In this case, bicycles and motorcycle helmets are typically considered complementary goods. When the price of bicycles increases, consumers may be less likely to purchase both bicycles and motorcycle helmets, resulting in a decrease in the quantity demanded of motorcycle helmets. Therefore, bicycles and motorcycle helmets are likely to have a negative cross elasticity of demand.
Goods like bicycle helmets, bicycle repair services, and roller skates are not typically considered complementary to bicycles, so their cross elasticity of demand with bicycles is likely to be low or even positive.
