A 3 percent increase in the price of tea causes 6 percent increase in the demand for coffee. The cross elasticity of demand for coffee with respect to the price of tea is
A)−0.5.
B)0.5.
C)−2.
D)2.

Question

Quizplus · Accepted Answer

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 6% / 3% = 2.

A 3 Percent Increase in the Price of Tea Causes