Which Pair of Goods Is Likely to Have the Largest

question 35

Multiple Choice

Which pair of goods is likely to have the largest positive cross-price elasticity?

• A) Peanut butter and jelly
• B) Butter and margarine
• C) Ramen noodles and a Rolex watch
• D) Cross-price elasticity is always negative, and simply reported in absolute value.

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Definitions:

Purchasing Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach to determine the relative value of the currencies.