If the cross elasticity of demand coefficient for potato chips and pretzels equals 1.5:
A)potato chips and pretzels must both be inferior goods.
B)potato chips and pretzels must both be normal goods.
C)potato chips and pretzels must be substitutes.
D)potato chips and pretzels must be complements.

Question

If the cross elasticity of demand coefficient for potato chips and pretzels equals 1.5:
A)​potato chips and pretzels must both be inferior goods.
B)​potato chips and pretzels must both be normal goods.
C)​potato chips and pretzels must be substitutes.
D)​potato chips and pretzels must be complements.

Quizplus · Accepted Answer

A cross elasticity of demand coefficient of 1.5 implies that a 1% increase in the price of potato chips will result in a 1.5% increase in the demand for pretzels, indicating that these two goods are substitutes.

If the Cross Elasticity of Demand Coefficient for Potato Chips