The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1

-Peanut butter and jelly are:
A)substitutes and have a positive cross-price elasticity of Demand.
B)complements and have a positive cross-price elasticity of demand.
C)substitutes and have a positive cross-price elasticity of demand.
D)complements and have a negative cross-price elasticity of demand.
E)inferior goods when the income elasticity of demand is positive.

Question

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-Peanut butter and jelly are:
A)substitutes and have a positive cross-price elasticity of Demand. 
B)complements and have a positive cross-price elasticity of demand. 
C)substitutes and have a positive cross-price elasticity of demand. 
D)complements and have a negative cross-price elasticity of demand. 
E)inferior goods when the income elasticity of demand is positive.

Quizplus · Accepted Answer

A and B can be eliminated as they contradict each other. Option D is incorrect as complements have a negative cross-price elasticity of demand. Option E is incorrect as it talks about income elasticity of demand, not cross-price elasticity of demand. Therefore, the correct answer is C as peanut butter and jelly are substitutes and have a positive cross-price elasticity of demand.

The Figure Given Below Shows the Demand Curves for Five