217k views
5 votes
The cross price elasticity for coffee for a change in the price of tea is likely to be __________.

User Keisher
by
6.8k points

1 Answer

6 votes

Answer:

Positive

Step-by-step explanation:

Coffee and tea are substitute goods. Therefore, the cross price elasticity of substitute goods is positive.

Positive cross price elasticity states that there is a direct relationship between the price of one good and the demand for its substitute good.

If there is an increase in the price of the coffee then as a result the demand for tea increases though the price of tea remains the same.

User Marten Veldthuis
by
6.5k points