CFA Practice Question

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CFA Practice Question

The cross elasticity of demand for a substitute is ______.

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
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