Question

. A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. Find out the cross elasticity of demand between Pepsi and Coca-Cola.

Answer 1

Answer:

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Explanation:

The cross elasticity of demand equals the percentage change in the quantity of Coca Cola divided by the percentage change in the price of a Pepsi. Hence the cross elasticity of demand equals (50 percent)/(10 percent) = 5.0.