Suppose that a 5% increase in the price of gasoline leads to a 15% decrease in the quantity demanded of SUVs.The cross-price elasticity of demand for SUVs is:
A)3.0.
B)3.3.
C).33.
D)33.

Question

Quizplus · Accepted Answer

The cross-price 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 -15% / 5% = -3.0.

Suppose That a 5% Increase in the Price of Gasoline