When the price of bread increases by 3 percent, the quantity demanded of crackers increases by 2 percent. The cross elasticity of demand between crackers and bread is:
A) 0.67.
B) 1.5.
C) 2.5.
D) 3.2.
E) 5.0.

Question

Quizplus · Accepted Answer

The cross elasticity of demand is calculated as the percentage change in quantity demanded of one good divided by the percentage change in price of another good. Here, it is 2% / 3% = 0.67.

When the Price of Bread Increases by 3 Percent, the Quantity