When the price of going to a movie rises 5 per cent, the quantity of DVDs demanded increases 10 per cent. The cross elasticity of demand equals
A) -2.0.
B) -0.50.
C) 10.0.
D) 2.0.
E) 0.50.

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 10% / 5% = 2.0.

When the Price of Going to a Movie Rises 5