A positive cross elasticity of demand means that the two goods are substitutes.
What is elasticity of demand?
Demand elasticity, often known as the elasticity of demand, gauges how consumers react to changes in price or income. Due to the fact that the price of a good or service is the most typical economic component used to measure it, it is frequently referred to as price elasticity of demand.
Therefore,
Lorena considers coffee and tea to be substitutes. therefore, the cross elasticity, also known as cross price elasticity, of demand between coffee and tea for lorena must be:
A positive cross elasticity of demand means that the two goods are substitutes.
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