If the Cross Elasticity of Demand Between Peanut Butter and Jelly

question 61

Multiple Choice

If the cross elasticity of demand between peanut butter and jelly is negative,then

• A)a rise in the price of peanut butter results in a rise in the equilibrium price of jelly.
• B)a rise in the price of peanut butter results in a fall in the equilibrium price of jelly.
• C)a rise in the price of peanut butter has no effect on the equilibrium price of jelly.
• D)a fall in the price of peanut butter results in a fall in the equilibrium price of jelly.
• E)peanut butter and jelly are substitutes.

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Definitions:

Marginal Seller

A seller who is indifferent about selling at the current market price and might leave the market if prices decrease.

Cost

Cost is the amount of money required to purchase, produce, or maintain something, encompassing both direct expenses and indirect expenditures.

Transaction Costs

Expenses incurred in buying or selling a good or service, including search and information costs, bargaining costs, and enforcement costs of policies.

Efficient Solution

An outcome where resources are allocated in the most effective manner, maximizing benefits and minimizing costs or waste.