Question : Which of the following goods is likely to have a negative cross elasticity of demand with smartphones?
Option 1: Phone cases
Option 2: Phone chargers
Option 3: Tablets
Option 4: Bluetooth headphones
Correct Answer: Tablets
Solution : The correct answer is (c) Tablets.
A negative cross elasticity of demand means that two goods are complements. In this case, a negative cross elasticity of demand with smartphones indicates that when the price of smartphones increases, the quantity demanded of tablets decreases, or vice versa.
Tablets are likely to have a negative cross elasticity of demand with smartphones because they often serve similar functions and can be used interchangeably for various tasks, such as browsing the internet, watching videos, or playing games. When the price of smartphones rises, consumers may opt to purchase tablets instead, leading to a decrease in the quantity demanded of tablets.
Phone cases, phone chargers, and Bluetooth headphones are related to smartphones, but they are not direct substitutes or complements. Therefore, they are less likely to have a negative cross elasticity of demand with smartphones.
