PRC-3 · Chapter 11 · Question 32 of 57
If the Cross Elasticity of Demand between Product X and Product Y is strongly positive (+2.5), what is the relationship between the two products?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) They are substitute goods
Explanation
A positive cross elasticity means that when the price of one good rises, consumers buy more of the other good instead, proving they are substitutes.
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