Suppose Goods a and B Are Substitutes for Each Other

question 152

Multiple Choice

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

• A)positive.
• B)negative.
• C)either positive or negative.It depends whether A and B are normal goods or inferior goods.
• D)either positive or negative.It depends whether the current price level is on the elastic or inelastic portion of the demand curve.

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Definitions:

Accepted Accounting Principles

Standards and conventions in accounting that provide guidelines for financial reporting, often referred to as Generally Accepted Accounting Principles (GAAP).

Inflationary Economies

Economies experiencing a sustained increase in the general price level of goods and services over a period of time.

Political Colonialism

The practice or policy of controlling a country or area by establishing colonies there, often involving economic exploitation and cultural domination.

Market Economy

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.