Taking the absolute value of the cross-price elasticity of demand is incorrect because it would:
A)remove the ability to tell whether the two products have inelastic demand or elastic demand.
B)cause the value of the cross-price elasticity of demand to become smaller.
C)remove the ability to tell whether the two products are substitutes or complements.
D)cause the value of the cross-price elasticity of demand to become zero.

Question

Quizplus · Accepted Answer

The sign of the cross-price elasticity (positive or negative) indicates whether the two products are substitutes or complements. Taking the absolute value would remove this important information.

Taking the Absolute Value of the Cross-Price Elasticity of Demand