If two goods were to become even stronger substitutes than before, an economist would expect the cross elasticity to become:
A) positive.
B) one.
C) zero.
D) smaller.
E) larger.

Question

Quizplus · Accepted Answer

If two goods become even stronger substitutes, then an increase in the price of one good would lead to a larger increase in demand for the other good. This means that the cross elasticity of demand between the two goods would be larger, since a smaller price change can lead to a larger change in demand. Therefore, the correct answer is (E) larger.

If Two Goods Were to Become Even Stronger Substitutes Than