Question

Please help me solve this problem!

suppose the cross-price elasticity of demand between goods X and Y is -3. How much would the price of good Y have to change in order to change the consumption of good X by 30 percent? Instruction: I

f you are entering a negative number, be sure to use a negative sign (-). percent

Answer 1

Answer : Cross price elasticity of demand = % changes in quantity demanded of good X / % change in price level of good Y

By putting given values in above formula we get,

- 3 = 30 / % change in price level of good Y

=> % change in price level of good Y= 30 / ( - 3 )

=> % change in price level of good Y = - 10

Therefore, here the price level of good Y have to change by - 10%.