Suppose that the cross price elasticity of demand between goods A and B equals 1.25. Which of the following is TRUE?
A. Goods A and B are complements because the cross price elasticity is positive.
B. Goods A and B are substitutes because the cross price elasticity is greater than one.
C. Goods A and B are substitutes because the cross price elasticity is positive.
D. Goods A and B are complements because the cross price elasticity is greater than one.
Answer: C
Economics
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