Consider the market for strawberries.Which statement MOST likely applies to the strawberry market?
A)The income elasticity of demand for strawberries is negative.
B)The price elasticity of supply of strawberries is greater in the short run than in the long run.
C)The price elasticity of demand for strawberries is lower in the long run than in the short run.
D)The cross-price elasticity of demand for strawberries with respect to the price of raspberries is positive.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. Given that strawberries and raspberries are substitutes, a positive cross-price elasticity of demand suggests that an increase in the price of raspberries will lead to an increase in the quantity demanded of strawberries. Therefore, D is the correct answer. A is incorrect because strawberries are considered a normal good, so the income elasticity of demand should be positive. B is incorrect because the price elasticity of supply is typically higher in the long run as producers have more time to adjust production levels. C is also incorrect because the price elasticity of demand is generally higher in the long run as consumers have more time to adjust their behavior and find substitutes.

Consider the Market for Strawberries