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JAMB Economics 1984 Question 17

Question 17

Elasticity

For two substitute goods, the cross elasticity of demand is

  1. A.greater than one but less than two
  2. B.zero
  3. C.negative
  4. D.positive
  5. E.infinity.
Show the answer and explanation

Answer: D (positive)

Explanation

If Y's price rises, people buy more of its substitute X, so the two changes have the same sign: positive cross elasticity.