If the demand for product A displays high and positive cross-price elasticity with respect to the price of product B, then:
A) the demand for product A is likely to have a low price elasticity.
B) products A and B are substitutes.
C) products A and B are complements
D) the demand for product B is likely to have a low price elasticity.

Question

Quizplus · Accepted Answer

High and positive cross-price elasticity implies that as the price of product B increases, the demand for product A increases. This indicates that the two products are substitutes, meaning that consumers are willing to switch from one product to the other depending on their relative prices.

If the Demand for Product a Displays High and Positive