Think cross elasticity. Suppose that the price of cod increases from $10 to $12. If perch and cod belong to the same market and consumers had demanded 20 perch before the increase in the price of cod, they will now demand
A) 34 perch
B) 8 perch
C) 24 perch
D) no more than 28 perch
E) at least 32 perch

Question

Quizplus · Accepted Answer

If perch and cod are substitutes, an increase in the price of cod will lead to an increase in the demand for perch. The cross elasticity of demand suggests that consumers will demand more perch, potentially at least 32, as they switch from cod to perch.

Think Cross Elasticity