The Cross-Price Elasticity of Demand for Peanut Butter with Respect

question 116

Multiple Choice

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?

• A) +15%
• B) +45%
• C) +4.5%
• D) -4.5%

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Definitions:

Transaction Price

The total amount of consideration agreed upon between parties in the transaction process for transferring a good, service, or financial asset.

Contract

A legally binding agreement between two or more parties.

Plus Margin

The percentage added to the cost of goods to arrive at a selling price that includes a profit margin.