The cross-price elasticity between natural gas and heating oil is estimated to be 2.3 . The cross-price elasticity between natural gas and electricity is estimated to be -0.8
What is the relationship between natural gas and heating oil? What is the relationship between natural gas and electricity? Explain.
Because the cross-price elasticity is positive, natural gas and heating oil are substitutes. As the price of one goes up, the demand for the other increases. On the other hand, natural gas and electricity are complements because the cross-price elasticity is negative. When the price of one goes up, the demand for the other falls.
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The practice of firms temporarily reducing prices in order to eliminate competition is called:
a. competitive pricing. b. predatory pricing. c. discount pricing. d. strategic pricing.
A decrease in the market interest rate, other things constant, will result in: a. a rightward shift of the money demand curve
b. a leftward shift of the money demand curve. c. an increase in the slope of the money demand curve. d. a movement up along the money demand curve. e. a movement down along the money demand curve.