The concept of cross price elasticity of demand refers to the:
A) ratio of the percentage change in the quantity demanded of a good at a specific price to the percentage change in the price of a related good.
B) ratio of the percentage change in the price of one good to the percentage change in the quantity demanded of a related good at a specific price.
C) ratio of the price elasticity of a normal good to the price elasticity of a related good.
D) change in income due to a change in the price of a related good.

Question

Quizplus · Accepted Answer

Cross price elasticity of demand measures how the quantity demanded of one good changes with a change in the price of another related good. It is measured as the ratio of the percentage change in the quantity demanded of a good at a specific price to the percentage change in the price of a related good. Therefore, option A correctly defines the concept of cross price elasticity of demand. Options B, C, and D are incorrect.

The Concept of Cross Price Elasticity of Demand Refers to The