On some days Gustav makes his own salad for lunch, preferring to use either iceberg or romaine lettuce, topped off with lots of fresh tomatoes. For Gustav, the cross-price elasticity of demand for iceberg lettuce with respect to romaine lettuce is _____, and the cross-price elasticity of demand for iceberg lettuce with respect to tomatoes is _____.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand for iceberg lettuce with respect to romaine lettuce is positive because they are substitutes; if the price of romaine lettuce increases, the demand for iceberg lettuce increases. The cross-price elasticity of demand for iceberg lettuce with respect to tomatoes is negative because they are complements; if the price of tomatoes increases, the demand for iceberg lettuce decreases.

On Some Days Gustav Makes His Own Salad for Lunch