For substitutes, the cross-price elasticity is ___, the own price elasticity is ___.

Question

BlackTom AI · Accepted Answer

In this question about elasticities, we need to map the standard interpretations of cross-price elasticity and own-price elasticity to the given blanks.
Option 1: 'Positive, often negative.' Cross-price elasticity for substitutes is positive because when the price of one good rises, the quantity demanded of its substitute tends to rise as consumers switch to it. The own-price elasticity is often negative due to the law of demand: as the price of a good increases, the quantity demanded typically falls. Therefore this option captures the conventional signs for both measures.
Option 2: 'Negative, often negative.' A negative cross-price elasticity would describe complements, not substitutes, since the quantity of one good would fall as the price of the other rises. The own-price elasticity being negative aligns with the normal downward-sloping demand curve, but the first part makes this option incorrect for substitutes.
Option 3: 'Negative, often positive.' This reverses the typical signs: cross-price elasticity for substitutes is not negative; it would be positive. The own-price elasticity being positive would imply quantity demanded increases when price rises, which contradicts basic demand behavior.
Option 4: 'Positive, often positive.' While the cross-price elasticity being positive is correct for substitutes, the own-price elasticity is not typically positive; a positive own-price elasticity would imply quantity demanded increases as price rises, which is contrary to the usual downward slope of the demand curve. Thus this option misstates the standard own-price effect.

MKTG1021.07|.08|.09 Fall 2025 Marketing Principles [Wang] MKTG1021-Final Exam- Requires Respondus LockDown Browser

For substitutes, the cross-price elasticity is _, the own price elasticity is _.

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