The cross-price elasticity between good X and good Y is positive. Other things being equal, if the price of X rises
A) quantity of Y demanded decreases.
B) quantity of Y demanded increases.
C) a consumer spends more on good Y than on good X.
D) a consumer spends more on good X than on good Y.

Question

Quizplus · Accepted Answer

A positive cross-price elasticity indicates that goods X and Y are substitutes. Therefore, if the price of X rises, consumers will demand more of good Y as they switch from X to Y.

The Cross-Price Elasticity Between Good X and Good Y Is