Question

it is reasonable to epect the cross price in elasticity between coffee and tea to be positive

Answer 1

ANSWER :

YES, Because As We Know That Tea And Coffee Both Are The Substitute Items For Eachother. It Means A Change In The Price Of One Item Effect The Quantity Demanded to The Other Item. So when Coffee Price Is Increase So Consumption Of Coffee Decrease And People Now Try To Used Tea Instead Of Coffee.

Positive Cross Elasticy Shows The Perfect Cross Relationship Between Two Product. in Here tea And Coffee Both are Substitute So Their Cross Elasticity Is Positive. So also In Here Income Effect Plays Major Role In The Demand. When Tea Price Increase So Coffee Is Cheaper For Individual so Their Consumption Of Coffee Increase so it is Reasonable to Epect the Cross Price in Elasticity between coffee and tea to be positive