If Tea and Coffee Are Substitutes, the Cross Elasticity of Coffee

question 375

Multiple Choice

If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be ________ and an increase in the price of tea will ________ the demand for coffee.

• A) positive; increase
• B) negative; decrease
• C) negative; increase
• D) positive; decrease

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Definitions:

Breach of Contract

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Agency Contract

A legal agreement where one party, the agent, agrees to act on behalf of another, the principal, in business dealings.

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