Your Local Bakery Gives You Information on Consumer Purchasing Habits

question 132

Multiple Choice

Your local bakery gives you information on consumer purchasing habits for muffins and cupcakes. It tells you that, when the price of a muffin is $1, people buy 55 cupcakes. When the price of a muffin is raised to $2, cupcake purchases go up to 65 cupcakes. The cross-price elasticity of demand is:

• A) 0.50.
• B) 0.25.
• C) 0.67.
• D) 2.00.
• E) 4.00.

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