If a 20% rise in price of Whiskey leads to a 30% increase in quantity
ECONOMICS
WAEC 2011
If a 20% rise in price of Whiskey leads to a 30% increase in quantity demanded of Schnapps, the cross elasticity of demand is
- A. 3.0
- B. 2.5
- C. 2.3
- D. 1.5
Correct Answer: D. 1.5
Explanation
It is calculated by taking the percentage change in the quantity demanded of one good and dividing it by the percentage change in the price of the other good.
Hence we; 30/20 = 1.5
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