The cross price elasticity of demand between two goods will be positive if
A) the two goods are complements.
B) the two goods are substitutes.
C) the two goods are luxuries.
D) one of the goods is a luxury and the other is a necessity.

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. If the two goods are substitutes, an increase in the price of one good will lead consumers to switch to the other good, resulting in an increase in the quantity demanded of the substitute good. Therefore, the cross price elasticity of demand will be positive for substitute goods.

The Cross Price Elasticity of Demand Between Two Goods Will