-The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices from $9 to $11. Therefore, the cross-price elasticity for these two products is
A) -2.0.
B) -0.5.
C) 0.5.
D) 2.0.

Question

-The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices from $9 to $11. Therefore, the cross-price elasticity for these two products is
A) -2.0. 
B) -0.5. 
C) 0.5. 
D) 2.0.

Quizplus · Accepted Answer

Cross-price elasticity measures the responsiveness of the demand for one good to a change in the price of another good. A positive cross-price elasticity indicates that the two goods are substitutes. Since the demand for widgets increased when the price of McBoover devices increased, they are substitutes, and the elasticity is positive.

-The Increase in the Demand for Widgets, Shown in the Figure