Answer to Question #302407 in Microeconomics for munna

Question

If a higher price for good X causes a decrease in the demand for good Y, the cross elasticity value for the two goods would be?

A. negative. B. equal to zero. C. positive. D. possibly negative, positive, or zero, but there is not enough information to decide.

please provide arguments against every option.

Answer 1

Positive - This is because a change in price of good X causes a proportional change in demand for good Y meaning the products are substitutes and their elasticity is perfectly elastic.