Suppose the Cross-Price Elasticity of Demand Between DVDs at Amazon

question 86

Multiple Choice

Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Rakuten.com is 3.5.Based on this information, predict what happens when Amazon.com lowers its DVD prices by 10 percent.

• A)The quantity of DVDs demanded on Amazon.com will increase by 35 percent.
• B)The quantity of DVDs demanded on Rakuten.com will increase by 35 percent.
• C)The quantity of DVDs demanded on Amazon.com will decrease by 35 percent.
• D)The quantity of DVDs demanded on Rakuten.com will decrease by 35 percent.

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Definitions:

Cash Receipt

Documented acknowledgment of the receipt of cash, typically recorded at the time cash is received from customers or other sources.