If there is an increase in the price of broccoli because of disastrous weather that destroys about half of this year's spinach crop, which of the following could be TRUE?
A) The cross elasticity of demand between spinach and broccoli is negative 1.25.
B) The demand curve for broccoli has shifted rightward and the cross elasticity of demand between spinach and broccoli is positive.
C) The demand curve for spinach has shifted to the leftward and the cross elasticity of demand between spinach and broccoli is positive.
D) The demand curves for spinach and broccoli have become more cross inelastic.

Question

Quizplus · Accepted Answer

The increase in the price of broccoli due to a decrease in the spinach supply suggests that spinach and broccoli are substitutes. This would cause the demand for broccoli to increase, shifting its demand curve rightward, and the cross elasticity of demand would be positive.

If There Is an Increase in the Price of Broccoli