**Question:**If the quantity demanded of tea decreases by 8% when the price of coffee increases by 2%, the cross-price elasticity of demand between tea and coffee is:- ○ -4.0- ○ -0.25- ○ 4.0- ○ 0.25**Explanation:**Cross-price elasticity of demand measures how the quantity demanded of one good changes in response to a price change of another good. It is calculated as:\[ E_{c} = \frac{\%\text{ Change in Quantity Demanded of Good A}}{\%\text{ Change in Price of Good B}} \]In this scenario:- % Change in Quantity Demanded of Tea = -8%- % Change in Price of Coffee = 2%Plug these values into the formula to find the cross-price elasticity.

please find the answer below.Cross price elasticity of demand is defined as the percentage change in quantity demanded of good A divided by the percentage change in the price of good B. In the question, the numerator will be thus 8 and the denominator will be 2. Therefore cross-price elasticity of demand = 8/2 = 4 Therefore, option c is the correct option.

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If the quantity demanded of tea decreases by 8% when the price of coffee increases by 2%, the cross-price elasticity of demand between tea and coffee is: -4.0 -0.25 O4.0 O0.25

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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