How much the demand for one good changes in response to a change in the price of a different good is measured by:
A) price elasticity of supply.
B) price elasticity of demand.
C) income elasticity.
D) cross-price elasticity.

Question

Quizplus · Accepted Answer

The change in demand for one good in response to a change in the price of a different good is measured by cross-price elasticity. Cross-price elasticity measures the percent change in the quantity demanded of one good in response to a 1% change in the price of another good. It is calculated as the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. Therefore, the correct answer is D, cross-price elasticity.

How Much the Demand for One Good Changes in Response