The cross elasticity of demand is a measure of how
A) responsive consumers are to changes in the price of a product.
B) responsive suppliers are to changes in the price of a product.
C) demand for a product changes when the price of a substitute or complement changes.
D) total revenue changes when the price of a product changes.
E) demand for a product changes when income changes.

Question

Quizplus · Accepted Answer

The cross elasticity of demand measures the responsiveness of the demand for a product to changes in the price of a substitute or complement. It tells us how much the quantity demanded of a product changes when the price of a related product changes. Therefore, option C is the correct answer. Options A, B, D, and E are incorrect as they do not match the definition of cross elasticity of demand.

The Cross Elasticity of Demand Is a Measure of How