Cross Elasticity of Demand Quiz

Definition of Cross Elasticity of Demand

• Measures the responsiveness of consumers of a particular

  good to a change in the good’s price.

• Measures the responsiveness of consumers of one

  good to a change in the price of a related good (either a substitute or a complement).

• Measures the responsiveness of consumers of a

  particular good to a change in their income.

• Measures the responsiveness of producers of a particular

  good to a change in the price of that good.

Formula of Cross Elasticity of Demand

• Percentage change in the price of Good A / Percentage change in the quantity of Good B

• Percentage change in the quantity of Good A / Percentage change in the quantity of Good B

• Percentage change in the price of Good A / Percentage change in the price of Good B

• Percentage change in the quantity of Good A / Percentage change in the price of Good B

Elasticity under percent under 0

• subsitute

• future expectations

• market size

• complementary

0 in a visual number line of elasticity

• complementary

• unrelated products

• subsitute

• elastic

• inelastic

A cut in price from $75 to $60 sees demand for a product rise by from 1,200 units to 1,500 units. What would the price elasticity of demand be for this product?

• -0.8

• -1

• -1.25

• -2

A cut in price from $1.50 to $1.20 sees demand for a product rise by 10%. What would the price elasticity of demand be for this product?

• 0.5

• 1

• 1.5

• 2

• 0.2

A firm increases its price from $8 to $12 and sees demand for the product fall by 20%. What would the price elasticity of demand be for this product?

• 2

• 1.6

• 1.2

• 0.8

• 0.4