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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