If cola and iced tea are good substitutes for consumers, what can we conclude about their elasticity from this information?
A) Their cross-price elasticities are greater than zero.
B) Their income elasticities are less than zero.
C) Their price elasticities of supply are less than one.
D) Their price elasticities of demand are less than one.

Question

Quizplus · Accepted Answer

If cola and iced tea are good substitutes for consumers, then an increase in the price of one (e.g. cola) will result in an increase in demand for the other (e.g. iced tea), indicating a positive cross-price elasticity of demand. Therefore, the correct answer is A.

If Cola and Iced Tea Are Good Substitutes for Consumers