The cross elasticity between Rolaids and Tums is expected to be:
A) negative.
B) positive.
C) zero.
D) one.
E) infinite.

Question

Quizplus · Accepted Answer

Cross elasticity measures the responsiveness of demand for one product to a change in price of a related product. Rolaids and Tums are both antacids and are considered substitutes for each other. Therefore, an increase in the price of Rolaids will lead to an increase in the demand for Tums as consumers switch to the cheaper substitute. This indicates a positive cross elasticity.

The Cross Elasticity Between Rolaids and Tums Is Expected to Be