If the price of butter changes by 5 percent,we observe a 25 percent change in the quantity demanded of margarine.The cross-price elasticity of these goods is:
A)-5.
B)5.
C)0.2.
D)-0.2.

Question

Quizplus · Accepted Answer

The 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 25% / 5% = 5.

If the Price of Butter Changes by 5 Percent,we Observe