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Question
What does zero cross elasticity of demand between two goods imply? Give an example to explain.
Short Answer
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Solution
- Cross elasticity of demand is considered zero when a change in the price of one good has no impact on the demand for another good. This occurs when the two goods are unrelated.
- For example, tea and a TV set are not connected, so a change in the price of tea will not influence how many TV sets people buy.
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