If Good a Is a Substitute for Good B,then the Cross

question 5

Multiple Choice

If good A is a substitute for good B,then the cross elasticity of demand for good B with respect to the price of good A is

• A)negative.
• B)equal to 1.
• C)positive.
• D)zero.
• E)equal to the cross elasticity of demand for good A with respect to the price of good B.

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Definitions:

Prices

The sum of money needed to buy a product or service.

Competitors

Other businesses or individuals that offer similar goods or services within the same market, competing for the same customers.

Oligopolist

A market participant in an oligopoly, where a small number of firms dominate the industry, influencing prices and market conditions.

Kinked Demand Curve

A theory in economics that suggests that prices in a monopolistic competition scenario may remain stable because competitors will match price decreases but not price increases.