When the Price of Milk Rose 50 Per Cent, the Quantity

question 74

Multiple Choice

When the price of milk rose 50 per cent, the quantity of milk sold fell 25 per cent and the sale of breakfast cereals also fell 25 per cent. This set of facts indicates that the

• A) cross elasticity between milk and cereal is negative so the two are complements.
• B) demand for breakfast cereals is price elastic.
• C) cross elasticity between milk and cereal is positive so the two are complements.
• D) demand for milk is price elastic.

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