Suppose that the quantity of apples sold increases by 30 percent after the price of pears increases by 15 percent. What is the coefficient of cross elasticity of demand?
A) 3.0.
B) 1.5.
C) 0.2.
D) 2.0.

Question

Quizplus · Accepted Answer

The coefficient of cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. In this case, the quantity of apples sold has increased by 30 percent in response to a 15 percent increase in the price of pears. Therefore, the coefficient of cross elasticity of demand is (30%/15%) = 2.0.

Suppose That the Quantity of Apples Sold Increases by 30