Suppose that the quantity of apples sold increases by 30 per cent after the price of pears increases by 15 per cent. What is the coefficient of the cross elasticity of demand?
A) 3.
B) 1.5.
C) 0.2.
D) 2.
E) 0.3.

Question

Quizplus · Accepted Answer

Cross elasticity of demand = (% change in quantity demanded of apples)/(% change in price of pears)
Given, % change in price of pears = 15%
% change in quantity demanded of apples = 30%
Substituting in the formula, we get:
Cross elasticity of demand = 30%/15% = 2
Therefore, the coefficient of cross elasticity of demand is 2.

Suppose That the Quantity of Apples Sold Increases by 30