positive
negative
zero
infinite
Answer is Right!
Answer is Wrong!
The correct answer is A. positive.
Substitutes are goods that can be used in place of each other. For example, coffee and tea are substitutes. If the price of coffee goes up, people will demand more tea, and vice versa. This is because people will switch from coffee to tea to save money.
The cross-elasticity of demand is a measure of how much the demand for one good changes in response to a change in the price of another good. The cross-elasticity of demand for substitutes is positive, which means that the demand for one good increases when the price of the other good increases.
Here is a brief explanation of each option:
- Option A: Positive. This is the correct answer. As explained above, the cross-elasticity of demand for substitutes is positive.
- Option B: Negative. This is not the correct answer. The cross-elasticity of demand for complements is negative. Complements are goods that are used together. For example, cars and gasoline are complements. If the price of cars goes up, people will demand less gasoline, and vice versa. This is because people will buy fewer cars if they are more expensive, and they will also drive less if they have to pay more for gasoline.
- Option C: Zero. This is not the correct answer. The cross-elasticity of demand can be zero for goods that are neither substitutes nor complements. For example, salt and pepper are goods that are not related to each other. If the price of salt goes up, people will not demand more or less pepper.
- Option D: Infinite. This is not the correct answer. The cross-elasticity of demand cannot be infinite. This is because the demand for a good cannot be infinitely sensitive to changes in the price of another good.