If the price of a good falls by 15% leading to a 20% fall in the quantity demanded of its substitute, the cross-price elasticity for the two goods is _____.
A) 0.75
B) 1.33
C) 5
D) -5

Question

Quizplus · Accepted Answer

The cross-price 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 (20% / 15%) = 1.33, indicating that the goods are substitutes.

If the Price of a Good Falls by 15% Leading