Which of the following statements correctly identifies the difference between the cross-price elasticity of demand and the income elasticity of demand?
A) The income elasticity of demand has only positive values, whereas the cross-price elasticity of demand can have both positive and negative values.
B) The cross-price elasticity of demand has only negative values, whereas the income-elasticity of demand can have both positive and negative values.
C) The income elasticity of demand for a good is independent of the price changes of related goods, whereas the cross-price elasticity of demand for a good is independent of the income changes of the consumer.
D) The income elasticity of demand for a good is zero for normal goods, whereas the cross-price elasticity of demand for a good is always positive for normal goods.

Question

Quizplus · Accepted Answer

The income elasticity of demand measures how the quantity demanded of a good responds to a change in consumers' income, independent of price changes of related goods. In contrast, the cross-price elasticity of demand measures how the quantity demanded of one good responds to a change in the price of another good, independent of changes in consumers' income.

Which of the Following Statements Correctly Identifies the Difference Between