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    Question

    The positive cross elasticity of demand between two

    products means the two products
    A substitutes Correct Answer Incorrect Answer
    B not related Correct Answer Incorrect Answer
    C complementary Correct Answer Incorrect Answer
    D None of these Correct Answer Incorrect Answer

    Solution

    A positive cross elasticity of demand means that the demand for good A will increase as the price of good B goes up. This means that goods A and B are good substitutes. so that if B gets more expensive, people are happy to switch to A. An example would be the price of milk.

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