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Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:A. negative and therefore these goods are substitutes.B. negative and therefore these goods are complements.C. positive and therefore these goods are substitutes.D. positive and therefore these goods are complements

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Answer:

C. positive and therefore these goods are substitutes.

Explanation:

Cross price elasticity is defined as a measure of the responsiveness of quantity demanded of a product to changes in price of another product. It is the percentage quantity change of a commodity when there is a percentage change in price of the other commodity.

Cross price elasticity= change in quantity of x/change in price of y

Cross price elasticity= 20/10= 2

The cross price elasticity is positive this indicates that the goods are substitutes. Increase in demand for one results in decraese in demand of the other

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