The greater the positive cross elasticity of demand between products A and B, the:
A)greater the degree to which they are substitutes.
B)greater the degree to which they are complements.
C)smaller the elasticity of demand for both products.
D)greater will be both products responsiveness to changes in income.

Question

The greater the positive cross elasticity of demand between products A and B, the:
A)​greater the degree to which they are substitutes.
B)​greater the degree to which they are complements.
C)​smaller the elasticity of demand for both products.
D)​greater will be both products responsiveness to changes in income.

Quizplus · Accepted Answer

Positive cross elasticity of demand indicates that the two products are substitutes, meaning that an increase in the price of one product will lead to an increase in the demand for the other. Therefore, the greater the positive cross elasticity of demand, the greater the degree to which the two products are substitutes.

The Greater the Positive Cross Elasticity of Demand Between Products