-In the above table, the cross price elasticity of demand for good X with good Y when P_Y falls from $20 to $18 is

Question

-In the above table, the cross price elasticity of demand for good X with good Y when P_Y falls from $20 to $18 is A) -2. B) 0. C) +1. D) -1.

Quizplus · Accepted Answer

Cross price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. A positive cross price elasticity indicates that the goods are substitutes. Since the elasticity is +1, it suggests that a 1% decrease in the price of good Y leads to a 1% increase in the quantity demanded of good X, indicating they are substitutes.

-In the Above Table, the Cross Price Elasticity of Demand