Question

A 2 percent increase in the price of milk causes a 4 percent reduction in the quantity demanded of chocolate syrup. what is the cross-price elasticity of demand for chocolate syrup with respect to the price of milk?

Answer 1

The cross-price of elasticity of demand for chocolate syrup with respect to the price of milk would be :

e = % ΔQ chocolate syrup / %ΔP of milk

e = -4% / 2%

e = -2 %