If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5 percent,what is the percentage change in quantity demanded of Good B?
A) 3 percent
B) 10 percent
C) -1.25 percent
D) 1.50 percent
E) -3 percent

Question

Quizplus · Accepted Answer

The formula for cross-price elasticity of demand is (% change in quantity demanded of good B / % change in price of good A). Given that the cross-price elasticity of demand between A and B is 2 and the percentage change in price of good A is 5%, we can set up the equation:
2 = (% change in quantity demanded of B / 5%)
Solving for the percentage change in quantity demanded of B, we get:
% change in quantity demanded of B = 2 x 5% = 10%
Therefore, the percentage change in quantity demanded of Good B is 10%.

If the Cross-Price Elasticity of Demand Between Good a and Good