When the price of going to a movie rises 5 percent,the quantity of DVDs demanded increases 10 percent.The cross elasticity of demand equals
A) 10.0.
B) 0.50.
C) -0.50.
D) -2.0.
E) 2.0.

Question

Quizplus · Accepted Answer

The cross elasticity of demand is calculated as the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. Here, it is (10% / 5%) = 2.0, indicating that DVDs and movie tickets are substitutes.

When the Price of Going to a Movie Rises 5