-Refer to the graphs above to answer this question.Suppose that the price of nuts decreases from P₁ to P₂ and the demand curve for chocolates shifts to the right from D₁ to D₂.What can be said about the cross-elasticity of demand for nuts and chocolates and their relationship? A)The cross-elasticity of demand coefficient between nuts and chocolates is negative and nuts and chocolates are substitutes. B)The cross-elasticity of demand coefficient between nuts and chocolates is negative and nuts and chocolates are complements. C)The cross-elasticity of demand coefficient between nuts and chocolates is positive and nuts and chocolates are complements. D)The cross-elasticity of demand coefficient between nuts and chocolates is positive and nuts and chocolates are substitutes.

Question

Quizplus · Accepted Answer

The decrease in the price of nuts leads to an increase in the demand for chocolates, indicating that they are complements. A positive shift in demand for one good due to a price decrease in another good suggests a negative cross-elasticity of demand, as the goods are consumed together.

-Refer to the Graphs Above to Answer This Question