The effect of a change in the price of tea on the quantity of coffee demanded is measured by the
A)price elasticity of demand
B)substitute elasticity of demand
C)cross-price elasticity of demand
D)income elasticity of demand
E)alternative elasticity of demand

Question

Quizplus · Accepted Answer

The change in price of tea is likely to affect the demand for coffee, as both are beverages and can be substitutes for each other. The cross-price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in the price of a related good. In this case, tea and coffee are related goods, and the cross-price elasticity of demand will indicate the extent to which the change in the price of tea affects the quantity of coffee demanded.

The Effect of a Change in the Price of Tea