If the quantity of tea demanded increases by 2% when the price of coffee increases by 6%, the cross-price elasticity of demand between tea and coffee is
A) -3.
B) 0.33.
C) 3.
D) 12.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand is calculated as the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. In this case, it is (2% / 6%) = 0.33, indicating that tea and coffee are substitutes.

If the Quantity of Tea Demanded Increases by 2% When