Which of the following values would most likely represent the cross elasticity of demand between butter and margarine?
A) -5.0
B) -1.0
C) -0.1
D) 0.0
E) 0.8

Question

Quizplus · Accepted Answer

Cross elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. A positive value, like 0.8, indicates that the goods are substitutes, meaning if the price of one increases, the demand for the other also increases. Butter and margarine are substitutes, so a positive cross elasticity is expected.

Which of the Following Values Would Most Likely Represent the Cross