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21 January, 21:59

If the cross-price elasticity between Good A and Good B is - 1.5 and the percentage change in quantity demanded of Good B is 15 percent, what is the percentage change in the price of Good A? a. - 10 percent b. - 0.10 percent c. - 11.50 percent d. - 1 percent e. 11.50 percent

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Answers (1)
  1. 21 January, 23:48
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    Option (a) is correct.

    Explanation:

    Given that,

    Cross-price elasticity between Good A and Good B = - 1.5

    Percentage change in quantity demanded of Good B = 15 percent

    Cross-price elasticity = Percentage change in quantity demanded of Good B : Percentage change in the price of Good A

    -1.5 = 15 : Percentage change in the price of Good A

    Percentage change in the price of Good A = 15 : (-1.5)

    = - 10 percent
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