Question

If the cross-elasticity of demand for two commodities is more than 1. So, both the goods are goods. * Zero O O O Unitary Negative C Positive​

Answer 1

If the cross elasticity of demand for two commodities is more than one, the two commodities are substitute goods.

Assume that two commodities, X and Y, are substitutes for one another.

Now, if there is a rise in the price of commodity Y, there will be a rise in demand for commodity X because consumers will now substitute X for Y.

The cross-price elasticity of demand for two goods will be positive in this situation.

The cross-price elasticity of demand for cotton shirts, for example, will be positive when compared to the price of non-cotton shirts.