A 2-percent increase in the price of peanut butter leads to a 7- percent increase in the quantity of almond butter demanded. It appears that: O cross-price elasticity of demand for almond butter is 3.5. O cross-price elasticity of demand for almond butter is -3.5. cross-price elasticity of demand for almond butter is -0.3. cross-price elasticity of demand for almond butter is 0.3.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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**Question:**

A 2-percent increase in the price of peanut butter leads to a 7-percent increase in the quantity of almond butter demanded. It appears that:

- ○ cross-price elasticity of demand for almond butter is 3.5.
- ○ cross-price elasticity of demand for almond butter is -3.5.
- ○ cross-price elasticity of demand for almond butter is -0.3.
- ○ cross-price elasticity of demand for almond butter is 0.3. 

**Explanation:**

The cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. If the elasticity is positive, it implies that the two goods are substitutes. In this scenario, the cross-price elasticity of demand for almond butter is calculated by dividing the percentage change in quantity demanded by the percentage change in price. Based on the options, the correct answer would be the one that reflects the positive correlation, which in this case would be 3.5, showing a direct relationship as substitutes.
Transcribed Image Text:**Question:** A 2-percent increase in the price of peanut butter leads to a 7-percent increase in the quantity of almond butter demanded. It appears that: - ○ cross-price elasticity of demand for almond butter is 3.5. - ○ cross-price elasticity of demand for almond butter is -3.5. - ○ cross-price elasticity of demand for almond butter is -0.3. - ○ cross-price elasticity of demand for almond butter is 0.3. **Explanation:** The cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. If the elasticity is positive, it implies that the two goods are substitutes. In this scenario, the cross-price elasticity of demand for almond butter is calculated by dividing the percentage change in quantity demanded by the percentage change in price. Based on the options, the correct answer would be the one that reflects the positive correlation, which in this case would be 3.5, showing a direct relationship as substitutes.
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