Suppose That When the Price of Good X Changes from $5

question 55

Multiple Choice

Suppose that when the price of good X changes from $5 to $10,the demand for good Y changes from 110 to 100,then the cross-elasticity of demand is:

• A) -0.09 and the goods are complements.
• B) 1.44 and the goods are complements.
• C) 1.44 and the goods are substitutes.
• D) -0.143 and the goods are complements.
• The percent change in quantity of Y is (100 - 110)/(100 + 110)= -0.0476 and the percent change in the price of X is (10 - 5)/(10 + 5)= 0.333.Thus the cross-price-elasticity is-0.0476/0.333 = -0.143.

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