The cross-price elasticity of demand measures how the quantity demanded of a good changes:
A) as its price changes
B) as the price of a related good changes
C) as income changes
D) as the price of an unrelated good changes

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand measures how the quantity demanded of a good changes as the price of a related good changes. It gives information about how two goods are related to each other in terms of demand. For example, if the cross-price elasticity of demand for coffee and tea is positive, then an increase in the price of tea will lead to an increase in the quantity demanded of coffee. If the cross-price elasticity of demand is negative, then an increase in the price of tea will lead to a decrease in the quantity demanded of coffee.

The Cross-Price Elasticity of Demand Measures How the Quantity Demanded