Exhibit 20-4

-Refer to Exhibit 20-4.As a consequence of the depicted change in supply of X,the demand curve for Y shifted from D₁to D₂.What is true of the cross elasticity of demand for Y?

Question

Exhibit 20-4 -Refer to Exhibit 20-4.As a consequence of the depicted change in supply of X,the demand curve for Y shifted from D₁to D₂.What is true of the cross elasticity of demand for Y? A) Ec > 0 B) Ec < 0 C) Ec = 0 D) It cannot be determined from the information provided.

Quizplus · Accepted Answer

Since the change in supply of X has caused a shift in the demand curve for Y, it implies that the two goods are related in some way. Therefore, the cross elasticity of demand for Y must be positive (i.e., when the price of one good increases, the demand for the other good also increases). Hence, the correct answer is A) Ec > 0.

Exhibit 20-4 -Refer to Exhibit 20-4.As a Consequence of the Depicted Change