The cross price elasticity for coffee for a change in the price of tea is likely to be
A)Negative and more negative than -1
B)Negative but less negative than -1
C)Zero
D)Positive

Question

Quizplus · Accepted Answer

Cross price elasticity of demand measures how the quantity demanded of one good responds to a change in the price of another good. If two goods are substitutes, like coffee and tea, an increase in the price of one (tea) will lead to an increase in the demand for the other (coffee), resulting in a positive cross price elasticity.

The Cross Price Elasticity for Coffee for a Change in the Price