The cross-price elasticity of demand between milk and soft drinks is likely to be:
A)negative, because the goods are complements.
B)positive, because the goods are complements.
C)negative, because the goods are substitutes.
D)positive, because the goods are substitutes.
E)zero, because the goods are not usually consumed by the same person at one time.

Question

The cross-price elasticity of demand between milk and soft drinks is likely to be:​
A)negative, because the goods are complements.
B)positive, because the goods are complements.
C)negative, because the goods are substitutes.
D)positive, because the goods are substitutes.
E)zero, because the goods are not usually consumed by the same person at one time.

Quizplus · Accepted Answer

The cross-price elasticity of demand is positive for substitute goods, as an increase in the price of one leads to an increase in the demand for the other. Milk and soft drinks are likely substitutes.

The Cross-Price Elasticity of Demand Between Milk and Soft Drinks