If the cross-price elasticity of demand between Breeze Detergent and Faber Detergent is a relatively large positive number, then it indicates that
A)the two brands are probably made by the same company.
B)the two brands of detergent are close substitutes.
C)consumers have a distinct preference for one brand versus the other.
D)detergents are necessities.

Question

Quizplus · Accepted Answer

A large positive cross-price elasticity of demand between two products indicates that they are close substitutes. This means that if the price of one product (for example, Breeze Detergent) increases, consumers are likely to switch to the other product (Faber Detergent), increasing the demand for the substitute product. Therefore, the two brands of detergent are close substitutes.

If the Cross-Price Elasticity of Demand Between Breeze Detergent and Faber