Asked by Ahmed Dabour on Jul 08, 2024
Verified
The larger the positive cross elasticity coefficient of demand between products X and Y,the:
A) stronger their complementariness.
B) greater their substitutability.
C) smaller the price elasticity of demand for both products.
D) the less sensitive purchases of each are to increases in income.
Cross Elasticity Coefficient
A measure of how the quantity demanded of one good changes in response to a price change in another good.
Substitutability
The degree to which a product or service can be replaced with another as viewed by the consumer, affecting competition and market dynamics.
- Recognize the significance of the cross elasticity of demand among commodities and its implications for their substitutability and complementarity.
Verified Answer
AA
Armando AraujoJul 12, 2024
Final Answer :
B
Explanation :
A large positive cross elasticity coefficient indicates that the products are close substitutes, meaning that an increase in the price of one product will lead to an increase in demand for the other product. Therefore, the greater their substitutability.
Learning Objectives
- Recognize the significance of the cross elasticity of demand among commodities and its implications for their substitutability and complementarity.