The Cross-Price Elasticity of Demand Between Bread and Potatoes Is

question 92

Multiple Choice

The cross-price elasticity of demand between bread and potatoes is estimated to be 0.5. This implies bread and potatoes are:

• A)normal goods.
• B)substitutes.
• C)unrelated.
• D)complements.

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Definitions:

Constant-cost Industry

An industry in which the costs of production, including inputs and labor, do not change as the overall industry output changes.

Resource Prices

The cost associated with acquiring the natural resources needed for production, such as minerals, timber, water, and land.

Output Increased

A situation where the production of goods or services in an economy rises.

Purely Competitive Market

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information, leading to firms being price takers.