Suppose the manager of a store wants to know whether the product of the store across the street is a substitute for her product

Economics Jan 19, 2021

Suppose the manager of a store wants to know whether the product of the store across the street is a substitute for her product. In other words, she would need to know if the _ for the products is positive. a. price elasticity of supply b. income elasticity of demand c. cross-price elasticity of demand d. price elasticity of demand e. cross-price elasticity of supply

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c. cross-price elasticity of demand

Cross elasticity of demand (XED) gauges the sensitivity of demand for one commodity to variation in the price of another commodity. For example, if XED = +0.69, it is an indication that the goods are substitutes. Therefore, a 1% hike in the price of good X will lead to 0.69% growth in the demand for good Y.

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