George always purchases the soda with the lowest price. For George, the cross price elasticity of demand for two brands of soda will be
A) equal to 0.
B) negative.
C) positive.
D) impossible to determine without more information.

Question

Quizplus · Accepted Answer

The cross price elasticity of demand between two goods is positive when the goods are substitutes, meaning that an increase in the price of one good leads to an increase in the demand for the other good. Since George always purchases the soda with the lowest price, the two brands of soda are substitutes for him. Therefore, if the price of one brand increases, he will switch to the other, indicating a positive cross price elasticity of demand.

George Always Purchases the Soda with the Lowest Price