Question : Which of the following goods is likely to have a negative cross elasticity of demand with coffee?
Option 1: Tea
Option 2: Sugar
Option 3: Milk
Option 4: Salt
Correct Answer: Milk
Solution : The correct answer is (d) Salt
A negative cross elasticity of demand indicates that two goods are complements, meaning that they are typically consumed together. When the price of one good (coffee) increases, the quantity demanded of the other good (in this case, salt) decreases.
In the context of coffee, salt is not typically consumed alongside it, so an increase in the price of coffee would not generally lead to a decrease in the quantity demanded of salt. Therefore, the cross elasticity of demand between coffee and salt is more likely to be negative.
Tea, sugar, and milk are not typically considered complements of coffee, so their cross elasticity of demand with coffee is less likely to be negative.
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