For which pairs of goods is the cross-price elasticity most likely to be positive? a. peanut butter and jelly b. bicycle frames and bicycle tires c. college textbooks and iPods d. pens and pencils

Question

Lucille Blanchard

Business

10 October, 13:52

For which pairs of goods is the cross-price elasticity most likely to be positive? a. peanut butter and jelly b. bicycle frames and bicycle tires c. college textbooks and iPods d. pens and pencils

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Answers (2)

Know the Answer?

Jordan Mahoney · Answer 1

Answer: the answer is a, peanuts and butter

Explanation:

A positive Cross price elasticity of two products indicate that the two goods are substitute that is, an increase in the price on one will bring about the increase of another meaning an increase in price of a peanut butter will lead to an increase in demand of jelly.

Barbara Owens · Answer 2

Answer: d. Pen and pencils.

Explanation:

Cross-price elasticity measures the degree of responsiveness of the demand for a certain good towards the change in the price of a related good. Percentage is used to measure cross-price elasticity.

In case of two goods like pens and pencils, cross price elasticity is positive. That is, if the price of a pen increases, it will lead to an increase in the demand for pencils. The propertional change in price of pens give a positive relative change in the demand for pencils.