If the cross price elasticity of two goods (X and Y) is equal to 1, this means that _____.
A) X and Y are complements
B) total revenue will fall with an increase in the price of X
C) X and Y are substitutes
D) total revenue will increase with a fall in the price of Y

Question

Quizplus · Accepted Answer

A positive cross price elasticity of demand, such as 1, indicates that the two goods are substitutes. This means that an increase in the price of one good (X) will lead to an increase in the demand for the other good (Y), and vice versa.

If the Cross Price Elasticity of Two Goods (X and Y)