If the quantity of soda demanded increases by 4% when the price of coffee increases by 16%,the cross-price elasticity of demand between soda and coffee is
A) -12.0.
B) -0.25.
C) 0.25.
D) 12.0.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand is calculated using the formula:
% change in quantity demanded of soda / % change in price of coffee

From the information given in the question, 
% change in quantity demanded of soda = 4%
% change in price of coffee = 16%

Substituting the values in the formula, we get:

Cross-price elasticity of demand = 4%/16% = 0.25

Therefore, the answer is C) 0.25.

If the Quantity of Soda Demanded Increases by 4% When