Question

Although we could describe both the cross-price elasticity of demand between paper coffee cups and plastic coffee lids and the cross-price elasticity of demand between sugar and artificial sweeteners as highly elastic, the first cross-price elasticity is negative and the second is positive. This is because:

Answer 1

Answer:

The paper cups and plastic cover lids are complimentary products. When you purchase plastic cups it follows that you would buy the plastic cover. Increase in demand of one leads to increase in demand for the other.

Meanwhile relationship between sugar and artificial sweeteners is one of substitution. Since sugar can replace artificial sweetener and vice versa, increase in demand for on will result in reduced demand for the other.

Explanation: