The Figure Given Below Shows the Demand Curves for Five

question 17

Multiple Choice

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1

-Assume that due to unfavorable conditions in a prime honey-producing area, the price of honey increases by 50 percent. The quantity consumed of herbal tea declines immediately by 25 percent. Everything else held constant, the:

• A)cross-price elasticity of demand for herbal tea and honey is negative, and therefore the two goods are substitutes.
• B)cross-price elasticity of demand for herbal tea and honey is negative, and therefore the two goods are complements.
• C)cross-price elasticity of demand for herbal tea and honey is positive, and therefore the two goods are substitutes.
• D)cross-price elasticity of demand for herbal tea and honey is positive, and therefore the two goods are complements.
• E)cross-price elasticity of demand cannot be determined from the information provided.

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Definitions:

Pleasure Principle

A psychoanalytic concept proposing that instinctual drives seek immediate gratification to relieve internal tensions.

Reality Principle

A psychoanalytic concept that represents the ability of the mind to assess the external world and act upon it accordingly, often as a counterbalance to the pleasure principle.

Id

In psychoanalysis, the part of the mind responsible for basic instincts and drives.

Sexual Drive

Sexual drive, or libido, is an individual's overall sexual desire or desire for sexual activity.