When two goods are substitutes for each other, the cross price elasticity of demand
A) will be negative.
B) will be zero.
C) may be either positive or negative.
D) will be positive.

Question

Quizplus · Accepted Answer

Cross price elasticity of demand measures the responsiveness of demand for one good to changes in the price of another good. When two goods are substitutes for each other, an increase in the price of one good will lead to an increase in the demand for the other good, resulting in a positive cross price elasticity of demand. Therefore, the correct answer is D.

When Two Goods Are Substitutes for Each Other, the Cross