If the cross-price elasticity of demand between Good A and Good B is 2,the price of Good B increases,and the price elasticity of demand for Good B is elastic,we can expect to see a ________ change in the quantity demanded for Good A.
A) positive,zero
B) positive,small
C) negative,infinite
D) negative,one-for-one
E) negative,large

Question

Quizplus · Accepted Answer

A positive cross-price elasticity of demand means that the two goods are substitutes. An increase in the price of Good B will lead to a decrease in the quantity demanded of Good B (due to the high price elasticity of demand), which in turn will increase the demand for Good A as consumers switch to the substitute Good A. Since the cross-price elasticity of demand is 2, a 1% increase in the price of Good B will cause a 2% increase in the quantity demanded of Good A. Therefore, we can expect to see a large negative change in the quantity demanded for Good A.

If the Cross-Price Elasticity of Demand Between Good a and Good