If the price of oranges went up by 20 percent, which of the following values of the cross price elasticity for apples would be most reasonable to anticipate?
A) 0.0
B) 1.2
C) -2.0
D) -0.2

Question

Quizplus · Accepted Answer

Cross price elasticity of demand measures the responsiveness of the quantity demanded for a good to a change in the price of another good. A positive value, like 1.2, indicates that the two goods are substitutes, meaning if the price of oranges increases, consumers are likely to buy more apples, assuming they are substitutes.

If the Price of Oranges Went Up by 20 Percent