Question

The quantity demanded of good A increases by 5 percent when the price of good B rises by 10 percent and other things remaining the same. The cross elasticity of demand between goods A and B is:

A. Positive

B. Negative

C. Zero

Answer 1

The quantity demanded of good A increases by 5 percent when the price of good B rises by 10 percent and other things remaining the same. The cross elasticity of demand between goods A and B is: Positive

The answer is option ⇒A.

Step-by-step explanation:

The cross elasticity of demand measures the percentage change in the quantity demanded of good A in response to a percentage change in the price of good B. If the quantity demanded of good A increases by 5 percent when the price of good B rises by 10 percent, then the cross elasticity of demand between these goods is positive.

This indicates that they are substitute goods, meaning that an increase in the price of good B leads to an increase in the quantity consumed of good A.

The answer is option ⇒A.