If two goods have a _____cross- price elasticity of demand, then the antitrust agencies can conclude that the products_____ compete in the same market as strong substitutes.
A)large; do
B)small; do
C)large; do not
D)zero; do

Question

Quizplus · Accepted Answer

When the cross-price elasticity of demand between two goods is large, it means that a change in the price of one good leads to a proportionate change in the quantity demanded of the other good. This indicates that the two goods are close substitutes and compete in the same market. Therefore, the antitrust agencies can conclude that the products do compete in the same market as strong substitutes.

If Two Goods Have a _____Cross- Price Elasticity of Demand