Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be
A)positive.
B)negative.
C)either positive or negative.It depends whether A and B are normal goods or inferior goods.
D)either positive or negative.It depends whether the current price level is on the elastic or inelastic portion of the demand curve.

Question

Quizplus · Accepted Answer

Substitutes have a positive cross-price elasticity, which implies that an increase in the price of one good will increase the demand for the other good. On the other hand, a decrease in the price of one good will decrease the demand for the other good. Therefore, the cross-price elasticity of substitutes will always be positive.

Suppose Goods a and B Are Substitutes for Each Other