Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
2 → 1 → 3 → 4
B
1 → 2 → 3 → 4
C
4 → 3 → 2 → 1
D
3 → 4 → 1 → 2
Understanding the Answer
Let's break down why this is correct
Answer
To understand how an increase in the price of one good affects the demand for a related good, we first need to observe the change in the price of the first good. For example, if the price of coffee rises, we then identify whether coffee and tea are substitutes or complements; since they are substitutes, we expect tea demand to rise. Next, we analyze the resulting change in demand for the second good, which in this case means more people will buy tea because coffee is now more expensive. Finally, we determine the cross-price elasticity value to quantify how much the demand for tea has changed in response to the price increase of coffee. This process helps us understand the relationship between the two goods in the market.
Detailed Explanation
First, you need to know if the goods are substitutes or complements. Other options are incorrect because This option starts with observing the price change; This option starts with calculating the elasticity value.
Key Concepts
Cross-Price Elasticity of Demand
Substitutes and Complements
Market Behavior
Topic
Cross-Price Elasticity of Demand
Difficulty
easy level question
Cognitive Level
understand
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