Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 but the cross-price elasticity for water and lemons is -0.13.This means that butter and margarine are _____,while water and lemons are _____.

A) complements;substitutes
B) substitutes;complements
C) inelastic goods;elastic goods
D) elastic goods;complements

Cross-Price Elasticity

A measure in economics that shows how the quantity demanded of one good reacts to a change in price of another good, indicating their substitutability or complementarity.

Butter And Margarine

These are two types of spreads commonly used as alternatives to each other; butter is made from animal fat while margarine is made from vegetable oils.

Water And Lemons

This may refer to the economic theory illustrating the concept of asymmetric information, where sellers have more information about the product quality than buyers, as famously exemplified in Akerlof’s “The Market for Lemons.”