- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 8. Topics in Demand and Supply Analysis
- Subject 2. Elasticities of Demand
CFA Practice Question
The cross elasticity of demand for a substitute is ______.
B. equal to one
C. less than zero
A. greater than zero
B. equal to one
C. less than zero
Correct Answer: A
User Contributed Comments 4
| User | Comment |
|---|---|
| diadia33 | why is it greater than 0? |
| DustinErik | Because if the price of a substitute goes up, the quantity demanded of the good also goes up. Therefore, it is greater than 0. |
| choas69 | Cross Elasticity: 1- increase in price for substitute leads to higher quantity demanded for own good. 2- increase in price for complement good leads to lower quantity demanded for own good. The End |
| Rohule | counter intuitive |