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:
A)decrease by 15%.
B)increase by 15%.
C)decrease by 1.5%.
D)increase by 1.5%.

Question

Quizplus · Accepted Answer

A cross-price elasticity of 1.5 means that a 1% increase in the price of one good leads to a 1.5% increase in the quantity demanded of the other good. Therefore, a 10% increase in the price of one good would lead to a 15% increase in the quantity demanded of the other good.

Suppose the Cross-Price Elasticity Between Two Goods Is 1