When product A is a good substitute for product B,the cross-price elasticity of demand for products A and B will be _____.
A)unity
B)negative
C)positive
D)decreasing
E)increasing

Question

Quizplus · Accepted Answer

When two products are substitutes, an increase in the price of one product will lead to an increase in the quantity demanded of the other product. This means that the cross-price elasticity of demand for products A and B will be positive. However, it is not necessarily true that the elasticity value will be unity or one, which implies that the two products are perfect substitutes. The value can be greater or less than one, depending on the degree of substitutability between the products.

When Product a Is a Good Substitute for Product B,the