The cross-price elasticity of demand between natural gas and electricity is 1.1.Therefore,electricity and natural gas must be substitutes.

Question

Quizplus · Accepted Answer

A cross-price elasticity of demand greater than zero indicates that two goods are substitutes, meaning that an increase in the price of one good leads to an increase in the demand for the other good. A cross-price elasticity of 1.1 indicates a relatively strong degree of substitutability between natural gas and electricity.

The Cross-Price Elasticity of Demand Between Natural Gas and Electricity