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The formula to compute the cross-price elasticity of demand (XED) is the following.

XED=(Q2−Q1)/[(Q2+Q1)/2](P2−P1)/[(P2+P1)/2]XED=(Q2−Q1)/[(Q2+Q1)/2](P2−P1)/[(P2+P1)/2]

Where,

• Q2= Final quantity of good X
• Q1= Initial quantity of good X
• P2= Final price of good Y
• P1=Initial price of good Y

Now that we have the correct formula, we can go ahead and compute the cross-price elasticity of demand coefficient.

XED=(3−10)/[(10+3)/2]($8−$5)/[($8+$5)/2]XED=(3−10)/[(10+3)/2]($8−$5)/[($8+$5)/2]

XED=(−7)/[(13)/2]($3)/[($13)/2]XED=(−7)/[(13)/2]($3)/[($13)/2]

XED=(−7)/[6.5]($3)/[(6.5]XED=(−7)/[6.5]($3)/[(6.5]

XED=−1.0769230770.4615384615XED=−1.0769230770.4615384615

XED=−2.33XED=−2.33 (the final answer is rounded to two decimal places)

Therefore, the cross-price elasticity of demand is -2.33. A negative cross-price elasticity of demand is associated with complementary goods. That is to say, two goods that are used together. When the price of complementary good increases, the quantity demanded of the second good decreases.