Suppose the cross elasticity of demand for two goods,X and Y,is positive.If the price of Y falls,then quantity demanded will
A)rise for both goods.
B)fall for X and rise for Y.
C)fall for both goods.
D)rise for X and fall for Y.
E)remain the same for both goods.

Question

Quizplus · Accepted Answer

When the cross elasticity of demand is positive, the two goods are substitutes. If the price of Y falls, consumers will buy more of Y and less of X, leading to a decrease in the quantity demanded for X and an increase for Y.

Suppose the Cross Elasticity of Demand for Two Goods,X and Y,is