If the cross-price elasticity of demand between fish and chicken is 2, then a 2% increase in the price of fish will result in a ________ in the quantity of chicken demanded.
A) 1% increase
B) 4% increase
C) 10% increase
D) 20% decrease

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand formula is (% Change in Quantity Demanded of Good B) / (% Change in Price of Good A). Given a cross-price elasticity of 2 and a 2% increase in the price of fish, the formula becomes: (X% Change in Quantity Demanded of Chicken) / (2% Change in Price of Fish) = 2. Solving for X gives a 4% increase in the quantity of chicken demanded.

If the Cross-Price Elasticity of Demand Between Fish and Chicken