If the cross-price elasticity of demand between beer and wine is 0.31, then beer and wine are
A)complements.
B)price-inelastic goods.
C)substitutes.
D)necessities.

Question

Quizplus · Accepted Answer

A positive cross-price elasticity of demand indicates that the two goods are substitutes, meaning that an increase in the price of one good (e.g. wine) will lead to an increase in the demand for the other good (e.g. beer). Therefore, beer and wine are substitutes.

If the Cross-Price Elasticity of Demand Between Beer and Wine