If the cross-price elasticity between Good A and Good B is -1.5 and the percentage change in quantity demanded of Good B is 15 percent,what is the percentage change in the price of Good A?
A) -10 percent
B) -0.10 percent
C) -11.50 percent
D) -1 percent
E) 11.50 percent

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand formula is: % Change in Quantity Demanded of Good B / % Change in Price of Good A. Given the elasticity is -1.5 and the % change in quantity demanded of Good B is 15%, we solve for % change in price of Good A: 15% / -1.5 = -10%.

If the Cross-Price Elasticity Between Good a and Good B