Chicken and fish are substitutes. Therefore, the cross elasticity of demand between chicken and fish should be:
A)negative.
B)positive.
C)zero.
D)All of the above are possible.

Question

Chicken and fish are substitutes. Therefore, the cross elasticity of demand between chicken and fish should be:
A)​negative.
B)​positive.
C)​zero.
D)​All of the above are possible.

Quizplus · Accepted Answer

The cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. Since chicken and fish are substitutes, an increase in the price of one (chicken) will cause consumers to switch to the other (fish), resulting in an increase in the quantity demanded of fish. Thus, the cross elasticity of demand between chicken and fish should be positive. Option A is incorrect because a negative cross elasticity of demand denotes that the two goods are complements. Option C is incorrect because a zero cross elasticity of demand denotes that the two goods are unrelated. Option D is incorrect because only option B (positive cross elasticity) is possible for substitutes.

Chicken and Fish Are Substitutes