The cross-price elasticity of demand for the products of monopolistically competitive firms is
A)Very high.
B)Low.
C)An indication that most of the products are complementary goods.
D)The same as in perfect competition.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand for the products of monopolistically competitive firms is generally low because each firm's product is differentiated and has its own unique features, leading to less substitute products in the market. Therefore, consumers are less likely to switch to alternative products when the price of a particular product increases, making cross-price elasticity lower than in perfect competition.

The Cross-Price Elasticity of Demand for the Products of Monopolistically