The demand for good X has been estimated to be ln Q_x^d = 100 − 2.5 ln P_X + 4 ln P_Y + ln M.The cross-price elasticity of demand between goods X and Y is: A) −2.5. B) 4.0. C) −2.5 percent. D) 4.0 percent.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand between goods X and Y can be calculated as: % change in quantity demanded of X / % change in price of Y = (dln Q_x^d) / (dln P_Y) = 4 Therefore, the cross-price elasticity of demand between goods X and Y is 4.0.

The Demand for Good X Has Been Estimated to Be