(Economics A-level) Is the cross elasticity of demand for tea likely to be positive or negative following a rise in the price of milk? Explain your answer

Let's first break down the concepts involved in this question. Price elasticity of demand is the responsiveness of the quantity of a good demanded to changes in the price of that good. Cross price elasticity of demand for tea with respect to milk is the responsiveness of the quantity of tea demanded when the price of milk changes. Tea and milk are good examples of economic complements: people like to consume them together and in set proportions. Hence when milk becomes more expensive people will be able to afford less milk, and so will not demand as much tea since they don't like to consume tea without milk. Hence the cross elasticity of tea when the price of milk changes is negative

DG

Related Maths GCSE answers

All answers ▸

How do I work out the length of sides on a right-angle triangle?


work out the value of 4a + 2b when a = 4 and b = 3


May you please help me solve these algebra problem set ?


A line passes through the points (-2,1) and (4,4). Find the equation of the line in the form y = mx + c