Match the following. List-I List-II a. Zero income elasticity 1. Substitute goods b. Unit cross elasticity 2. Complementary goods c. Positive cross elasticity 3. Indifferent goods d. Negative cross elasticity 4. Independent goods

The correct answer is: A. a-3, b-2, c-1, d-4.

• Zero income elasticity means that the demand for a good does not change when income changes. This is the case for inferior goods, which are goods that people consume less of as their income increases.
• Unit cross elasticity means that the change in the demand for a good is equal to the change in the price of another good. This is the case for substitute goods, which are goods that can be used in place of each other.
• Positive cross elasticity means that the change in the demand for a good is in the same direction as the change in the price of another good. This is the case for complementary goods, which are goods that are used together.
• Negative cross elasticity means that the change in the demand for a good is in the opposite direction of the change in the price of another good. This is the case for independent goods, which are goods that are not related to each other.

Here are some examples of each type of good:

• Inferior goods: Examples of inferior goods include public transportation, used cars, and generic brands. As people’s income increases, they tend to consume less of these goods and more of luxury goods.
• Substitute goods: Examples of substitute goods include coffee and tea, Coke and Pepsi, and Ford and Toyota. If the price of coffee increases, people will tend to buy more tea, and vice versa.
• Complementary goods: Examples of complementary goods include cars and gasoline, computers and software, and cameras and film. If the price of cars decreases, people will tend to buy more gasoline, and vice versa.
• Independent goods: Examples of independent goods include bread and milk, shoes and socks, and pens and paper. The demand for these goods is not affected by the prices of other goods.