The quantity demanded of good A increases by 10% when the price of good B rises by 5%, other things remaining the same

Marketing Dec 21, 2020

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?

Expert Solution

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.

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