Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is
A)negative, and therefore these goods are substitutes.
B)negative, and therefore these goods are complements.
C)positive, and therefore these goods are substitutes.
D)positive, and therefore these goods are complements.

Question

Quizplus · Accepted Answer

The coefficient of cross elasticity of demand is positive when the quantity demanded of one good increases as the price of another good increases, indicating that the two goods are substitutes.

Suppose That a 10 Percent Increase in the Price of Normal