Question

The price of peanut butter increased by 25% and the quantity of jelly demanded decreased by 50%. Using one decimal place and the negative sign if necessary, the cross-price elasticity between peanut butter and jelly is _____.

Answer 1

Answer:

-2

Explanation:

To find the cross price elasticity between to goods, we use this formula:

Cross Price Elasticity of Demand = % change in quantity demanded of good 1 / % change in the price of good 2

Now, we plug the amounts into the formula

Cross Price Elasticity of Demand = -50% / 25%

                                                      = -2