A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. The cross elasticity of demand between a Pepsi and Coca-Cola is
A) 50.
B) 10.
C) 5.
D) 0.20.

Question

Quizplus · Accepted Answer

The cross 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. Here, it is -50% / -10% = 5.

A 10 Percent Decrease in the Price of a Pepsi