GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price-demand
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Cross-Demand
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Income-Demand
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None of the above
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Detailed explanation-1: -Change in demand of a commodity due to change in the price of substitute is called cross elasticity. For example, change in demand of tea due to change in the price of coffee is called cross elasticity.
Detailed explanation-2: -If demand of the commodity changes with the change in price, it is known as price elasticity. For example if the demand of cars falls with the change in price, it is known as price elasticity as demand responded to the price change.
Detailed explanation-3: -A decrease in the price of substitute goods leads to an decrease in the demand for given commodity and vice versa. Eg., if price of a substitute good (say coffee) decreases, then demand for given commodity (say tea) will fall, so demand for a given commodity is directly affected by change in price of substitute goods.