Suppose an economist wants to calculate how responsive the quantity demanded of good $X$ is in response to a change in the price of good $Y$.

Which of the formulas below would be a correct formula to use if we wanted to calculate the cross-price elasticity of demand for good $X$ and $\operatorname{good} Y ?$

Choose 1 answer:
(A) $\frac{\% \Delta Q_{X}}{\% \Delta P_{Y}}$
(B) $\frac{\% \Delta Q_{X}}{\% \Delta P_{X}}$
(c) $\frac{\% \Delta Q_{X 1}}{\% \Delta Q_{Y 1}}$
(D) $\frac{\% \Delta Q_{Y}}{\% \Delta P_{X}}$
(E) $\% \Delta Q_{Y}$

Question

Suppose an economist wants to calculate how responsive the quantity demanded of good $X$ is in response to a change in the price of good $Y$.

Which of the formulas below would be a correct formula to use if we wanted to calculate the cross-price elasticity of demand for good $X$ and $\operatorname{good} Y ?$

Choose 1 answer:
(A) $\frac{\% \Delta Q_{X}}{\% \Delta P_{Y}}$
(B) $\frac{\% \Delta Q_{X}}{\% \Delta P_{X}}$
(c) $\frac{\% \Delta Q_{X 1}}{\% \Delta Q_{Y 1}}$
(D) $\frac{\% \Delta Q_{Y}}{\% \Delta P_{X}}$
(E) $\% \Delta Q_{Y}$

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Cross-Price Elasticity: Cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. ‖ ‖ b ⋮ Correct Formula: The correct formula to calculate the cross-price elasticity of demand for good $X$ and good $Y$ is given by: $$ \text{Cross-Price Elasticity} = \frac{\% \Delta Q_{X}}{\% \Delta P_{Y}} $$ This formula indicates how the quantity demanded of good $X$ changes in response to a change in the price of good $Y$. ‖ ∻Answer∻ ⚹ (A) $\frac{\% \Delta Q_{X}}{\% \Delta P_{Y}}$ ⚹ ∻Key Concept∻ ⚹ Cross-Price Elasticity of Demand ⚹ ∻Explanation∻ ⚹ The cross-price elasticity of demand is used to measure the responsiveness of the quantity demanded of one good when the price of another good changes. The correct formula is $\frac{\% \Delta Q_{X}}{\% \Delta P_{Y}}$, which shows the percentage change in the quantity demanded of good $X$ relative to the percentage change in the price of good $Y$. ⚹◊What factors determine the elasticity of demand for good X in response to a change in the price of good Y in a competitive⍭ Generate me a similar question◊

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