If the quantity of chicken demanded increases by 1.25 percent when the price of beef increases by 2.5 percent,the cross elasticity of demand between chicken and beef is
A)3.125.
B)-3.125.
C)-0.5.
D)2.0.
E)0.5.

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. In this case, it is (1.25% / 2.5%) = 0.5, indicating that chicken and beef are substitutes, but the relationship is relatively inelastic.

If the Quantity of Chicken Demanded Increases by 1