Question

Suppose the cross-price elasticity between two goods is 1.5. If the price of one good increases by 10%, then the quantity demanded of the other good will ______

Answer 1

0.15

Step-by-step explanation:

Cross price elasticity of demand measures the responsiveness of quantity demanded of one good to changes in price of another good.

Cross price elasticity = percentage change in quantity demanded of good X / percentage change in price of good Y

1.5 = percentage change in quantity demanded/ 0.1

= 0.15

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