If the cross- price elasticity between Goods X and Y is 2.0, the goods are and an increase in the price of Good X will cause a(n)_________in the quantity demanded of Good Y.
A)substitutes; decrease
B)substitutes; increase
C)complements; decrease
D)complements; increase

Question

Quizplus · Accepted Answer

The positive cross-price elasticity of 2.0 indicates that Goods X and Y are substitutes, meaning that as the price of Good X increases, consumers will buy more of Good Y, hence an increase in the quantity demanded of Good Y.

If the Cross- Price Elasticity Between Goods X and Y