The correct answer is: A. Complementary; -0.5
The cross-price elasticity of demand is a measure of how much the demand for one good changes in response to a change in the price of another good. When two goods are complementary, a decrease in the price of one good will lead to an increase in the demand for the other good. This is because the two goods are used together, so a decrease in the price of one good makes the other good more affordable, which leads to an increase in demand.
In this case, textbook and enrolments are complementary goods. When textbook prices double, the demand for textbooks decreases by 10%. This is because students are now less willing to pay for textbooks, as they are more expensive. As a result, the demand for enrolments also decreases, as fewer students are willing to enroll in college.
The cross-price elasticity of demand for textbooks and enrolments is -0.5. This means that a 1% increase in the price of textbooks leads to a 0.5% decrease in the demand for enrolments.
Here is a brief explanation of each option:
- Option A: Complementary; -0.5. This is the correct answer. Textbooks and enrolments are complementary goods, and the cross-price elasticity of demand is -0.5.
- Option B: Substitutes; 5. This is incorrect. Textbooks and enrolments are not substitutes, as they are not used in place of each other. The cross-price elasticity of demand for substitutes is positive.
- Option C: Complementary; -0.1. This is incorrect. The cross-price elasticity of demand for complementary goods is more negative than -0.1.
- Option D: Substitutes; 0.5. This is incorrect. Textbooks and enrolments are not substitutes, as they are not used in place of each other. The cross-price elasticity of demand for substitutes is positive.