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Q: The measure of responsiveness of the demand for Tea towards the change in the price of Coffee in the market is an example of______ .
  • A. Direct Demand
  • B. Cross Elasticity of Demand
  • C. Composite Demand
  • D. Indirect Demand
Correct Answer: Option B - Cross eleasticity of demand measures the responsiveness in the demanded quantity of one good (Tea) when the price of another product (coffee) changes. This concept is used to identify the relationship between two goods they can be- (i) Complements (negative cross elasticity) Ex. Car & Petrol. (ii) Substitutes (positive cross elasticity) Ex. Tea and Coffee. (iii) Unrelated
B. Cross eleasticity of demand measures the responsiveness in the demanded quantity of one good (Tea) when the price of another product (coffee) changes. This concept is used to identify the relationship between two goods they can be- (i) Complements (negative cross elasticity) Ex. Car & Petrol. (ii) Substitutes (positive cross elasticity) Ex. Tea and Coffee. (iii) Unrelated

Explanations:

Cross eleasticity of demand measures the responsiveness in the demanded quantity of one good (Tea) when the price of another product (coffee) changes. This concept is used to identify the relationship between two goods they can be- (i) Complements (negative cross elasticity) Ex. Car & Petrol. (ii) Substitutes (positive cross elasticity) Ex. Tea and Coffee. (iii) Unrelated