If the quantity of tea demanded increases by 2% when the price of coffee increases by 8%, the cross- price elasticity of demand between tea and coffee is:
A) 4
B) - 25
C) - 4
D) 0.25

Question

Quizplus · Accepted Answer

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 2% / 8% = 0.25.

If the Quantity of Tea Demanded Increases by 2% When