If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be ________ and an increase in the price of tea will ________ the demand for coffee.
A) positive; increase
B) negative; decrease
C) negative; increase
D) positive; decrease

Question

Quizplus · Accepted Answer

When two goods are substitutes, an increase in the price of one good (tea) will lead to an increase in the demand for the other good (coffee), resulting in a positive cross elasticity of demand.

If Tea and Coffee Are Substitutes, the Cross Elasticity of Coffee