Cross-price elasticity is very low in monopolistic competition.

Question

Quizplus · Accepted Answer

Cross-price elasticity measures the responsiveness of demand for one good to a change in the price of another good. In monopolistic competition, products are differentiated, so consumers have a preference for one brand over another. As a result, a change in the price of one brand will have a relatively small impact on the demand for other brands, leading to a low cross-price elasticity.

Cross-Price Elasticity Is Very Low in Monopolistic Competition