Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?
A)A 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption.
B)A 6 percent increase in the price of grapefruit juice leads to a 1 percent increase in orange juice consumption.
C)If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased.
D)The demand for orange juice is 6 times greater than the demand for grapefruit juice.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand of 6 indicates that a 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in the consumption of orange juice, showing a strong substitute relationship.

Suppose the Cross-Price Elasticity of Demand Between Grapefruit Juice and Orange