question archive The quantity demanded of good A increases by 10% when the price of good B rises by 5%, other things remaining the same
The quantity demanded of good A increases by 10% when the price of good B rises by 5%, other things remaining the same
Subject:EconomicsPrice:2.88 Bought3
The quantity demanded of good A increases by 10% when the price of good B rises by 5%, other things remaining the same. What is the cross elasticity of demand of good A with respect to good B?
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Cross Elasticity = Percentage change in Quantity demanded of the other good/ Percentage change in price of the given good
Percentage change in quantity demanded of Good A = 10%
Percentage change in price of Good B = 5%
Putting the above values in the cross elasticity formula we have,
Cross Elasticity = 10%/ 5%
Cross Elasticity = 2
Hence the cross elasticity of good A with respect to good B is 2.
