What is the cross-price elasticity of demand () between two goods that are substitutes, such as butter and margarine?
Answer and explanation
Correct answer: C. Positive ()
- Step 1: Cross-price elasticity . Step 2. If goods and are substitutes, an increase in shifts consumers toward , increasing (). **Answer: Positive (). Why not the others:** Complements (e.g., printers and ink cartridges) have negative cross-price elasticity (); independent goods have .
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