Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208.What is the value of the cross elasticity?
A)+ 0.2.
B)+ 0.4.
C)+ 1.0.
D)+ 2.5.
E)+ 5.0.

Question

Quizplus · Accepted Answer

The formula for cross elasticity of demand is given by:
Cross elasticity of demand = % Change in quantity demanded of B / % Change in price of A

% Change in quantity demanded of B = ((208 - 192) / (192)) x 100% = 8.33%
% Change in price of A = ((11 - 9) / (9)) x 100% = 22.22%

Substituting the values in the formula, we get:
Cross elasticity of demand = 8.33% / 22.22% = 0.375

Rounding off to one decimal place, we get:
Cross elasticity of demand = 0.4

Therefore, the answer is B.

Suppose That the Price of Product a Increased from $9