Suppose that the cross-price elasticity of demand for movie popcorn with respect to movie tickets is -0.75. If the price of movie tickets rises by 4%, the quantity demanded of movie popcorn will:
A) fall by 18.75%.
B) fall by 5.33%.
C) rise by 3%.
D) fall by 3%.

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand formula is percentage change in quantity demanded of good X / percentage change in price of good Y. Here, it's -0.75 = (percentage change in quantity demanded of popcorn) / 4%. Solving for the percentage change in quantity demanded of popcorn gives -3%.

Suppose That the Cross-Price Elasticity of Demand for Movie Popcorn