Suppose the cross-elasticity of demand for two goods,domestic cheese and imported cheese,is positive.If the price of imported cheese falls,then quantity demanded will
A)rise for both domestic and imported cheese.
B)fall for both domestic and imported cheese.
C)rise for domestic cheese and fall for imported cheese.
D)fall for domestic cheese and rise for imported cheese.
E)There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

If the cross-elasticity of demand between two goods is positive, it means that they are substitutes. Hence, if the price of imported cheese falls, consumers will switch from buying domestic cheese to imported cheese, leading to a fall in the quantity demanded of domestic cheese and a rise in the quantity demanded of imported cheese.

Suppose the Cross-Elasticity of Demand for Two Goods,domestic Cheese and Imported