Suppose the manager of a store wants to know whether the product of the store across the street is a substitute for her product.In other words,she would need to know if the cross-price elasticity of demand for the products _____.
A)is positive
B)is negative
C)is unity
D)is zero
E)is infinite

Question

Quizplus · Accepted Answer

A positive cross-price elasticity of demand indicates that the two products are substitutes for each other. If the price of one product increases, the demand for the other product will increase as consumers switch to the substitute product. Therefore, the manager would need to know if the cross-price elasticity of demand is positive to determine if the other store's product is a substitute for her product.

Suppose the Manager of a Store Wants to Know Whether