Considering the concept of cross-price elasticity,if two goods are substitutes:
A) an increase in the price of one causes a decrease in the demand for the other.
B) a decrease in the price of one causes an increase in the demand of the other.
C) an increase in the price of one causes an increase in the demand for the other.
D) the cross-price elasticity is negative.

Question

Quizplus · Accepted Answer

When two goods are substitutes, an increase in the price of one good leads to an increase in the demand for the other good, as consumers switch to the cheaper alternative.

Considering the Concept of Cross-Price Elasticity,if Two Goods Are Substitutes