When the price of good A rises from $11 to $33, the quantity of good A demanded decreases from 400400 to 200200 units a day a
nd the quantity of good C demanded increases from 150150 to 250250 units a day. From this information, we can determine that _______. A. the cross elasticity of demand is positive, so the two goods are substitutes B. the goods are complements because as the price of good A changes so does the quantity demanded of good C C. the cross elasticity of demand is less than 1, so the two goods are substitutes D. good C is a normal good because as the price of good A rises, people switch to good C
1 answer:
Answer:
The correct answer is option A.
Explanation:
The price of good A is initially at $11.
The initial demand of A is 400 units.
The price increases to $33.
The demand of A , as a result, falls to 200 units.
The demand for good C is initially at 150 units.
With increase in price of A, the demand rises to 250 units.
The positive cross elasticity as given in the figure represents that the two goods are substitutes. When price of A increases, consumer will prefer its cheaper substitute. So, the demand for good C will increase.
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