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

question 204

Multiple Choice

Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Buy.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 Buy.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 Buy.com will decrease by 35 percent.

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