When two goods are substitutes, their cross price elasticity of demand
A) infinity.
B) 0.
C) negative.
D) positive.

Question

Quizplus · Accepted Answer

When two goods are substitutes, their cross price elasticity of demand is positive. This means that if the price of one good increases, the demand for the other good will increase as well. If the price of Coca-Cola goes up, for example, the demand for Pepsi (a close substitute) will increase as consumers switch to the cheaper alternative.

When Two Goods Are Substitutes, Their Cross Price Elasticity of Demand