Suppose the Cross-Price Elasticity Between Two Goods Is 1

question 98

Multiple Choice

Suppose the cross-price elasticity between two goods is 1.5.If the price of one good increases by 10%,then the quantity demanded of the other good will:

• A)decrease by 15%.
• B)increase by 15%.
• C)decrease by 1.5%.
• D)increase by 1.5%.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases.

Demand Curve

A diagram that shows how the quantity of a product demanded by buyers changes according to its price.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good that consumers are willing to purchase at various prices.

Substitute Good

A product or service that consumers can use in place of another to satisfy similar needs or desires, affecting demand as prices change.