-Refer to the above table. Suppose the price of A increases from $10 to $12. What is the cross price elasticity of demand between A and C?
A) +0.292
B) +7.06
C) -7.06
D) -0.292

Question

-Refer to the above table. Suppose the price of A increases from $10 to $12. What is the cross price elasticity of demand between A and C?
A) +0.292 
B) +7.06 
C) -7.06 
D) -0.292

Quizplus · Accepted Answer

The cross price elasticity of demand formula is (% change in quantity demanded of C) / (% change in price of A). Without specific quantities, we assume a positive cross elasticity indicating that A and C are substitutes. A positive value closest to zero, like +0.292, suggests a weak substitutability between A and C.

-Refer to the Above Table