Good X and Good Y are related goods. When the price of good X rises by 20 percent, the quantity demanded for good Y falls by 40 percent. What is the cross-price elasticity?
A) 2
B) 4
C) -0.5
D) -2

Question

Quizplus · Accepted Answer

Cross-price elasticity of demand measures the responsiveness of the quantity demanded for one good to a change in the price of another good. In this case, the percentage change in quantity demanded for good Y is twice the percentage change in price for good X, which gives us a cross-price elasticity of -2.

Good X and Good Y Are Related Goods