The value of cross-price elasticity of demand between orange soda and grape soda is
A)negative
B)positive
C)0
D)between -1 and 0
E)less than -1

Question

Quizplus · Accepted Answer

Cross-price elasticity of demand between two goods is positive if an increase in the price of one good leads to an increase in the demand for the other good. As orange soda and grape soda are substitutes, an increase in the price of one (for example, orange soda) may lead to an increase in the demand for the other (grape soda). Therefore, the value of cross-price elasticity of demand between orange soda and grape soda is positive.

The Value of Cross-Price Elasticity of Demand Between Orange Soda