Suppose That the Quantity of Apples Sold Increases by 30

question 85

Multiple Choice

Suppose that the quantity of apples sold increases by 30 per cent after the price of pears increases by 15 per cent. What is the coefficient of the cross elasticity of demand?

• A) 3.
• B) 1.5.
• C) 0.2.
• D) 2.
• E) 0.3.

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Definitions:

Substitution Effect

The shift in buying habits because of variations in the prices of different products, causing individuals to substitute pricier options with more affordable ones.

Labor Supply

The total hours that workers are willing and able to work at a given wage rate in an economy.

Time Allocation

The decision about how many hours to spend on different activities, which leads to a decision about how much labor to supply.

Income Effect

The change in an individual’s or economy’s income and how that change affects the quantity demanded of a good or service.