When lettuce prices doubled, from about $1.50 per head to about $3.00, the reaction of one consumer was quoted in a newspaper article: "I will not buy lettuce when it's $3 a head," she said, adding that other green vegetables can fill in for lettuce. "If bread were $5 a loaf we'd still have to buy it. But lettuce is not that important in our family."

a. For this consumer's household, which product has a higher price elasticity of demand: bread or lettuce? Briefly explain.

b. Is the cross-price elasticity of demand between lettuce and other green vegetables positive or negative for this consumer? Briefly explain.

a. For the consumer, the price elasticity of lettuce is higher than the price elasticity of bread. This is because, the consumer is more responsive to the price change of lettuce than the price change of bread. When the price of lettuce increases to $3, the consumer would not purchase any quantities of lettuce, whereas when the price of the bread increases to $5, the consumer would still be willing to maintain the consumption of the bread. This indicates that the price change had a greater effect in the demand of lettuce than to the demand of bread.

b. The cross price elasticity of demand in this case will be negative for this consumer. This is because if it would have been positive, then both the goods, bread and lettuce would have been jointly demanded in certain fixed proportions. But here we see that, the consumer will rather not purchase lettuce in case of price increase, and would substitute bread in its place even when the price of the bread increases. This indicates that when the price of lettuce increases, the quantity demanded of bread will increase.