alleryStart learning →The price of tea rises 10% and coffee demand rises 5%. What is the cross elasticity of coffee with respect to tea?
A2
B-0.5
C0.5
D-2
Answer & Solution
Correct answer: C. 0.5
Cross elasticity is 5% divided by 10%, equal to +0.5, which indicates substitutes.
Keep practising Law of Demand
Browse all Law of Demand questions for CA Foundation, or explore more Business Economics topics.
Related questions
A shop sells 200 units at Rs 50 each. Price rises to Rs 60 and sales fall to 160. What is A perfectly inelastic demand curve for a good is typical when the good has what?Keynesian economics is sometimes called what?The party with fewer opportunities to avoid a tax usually bears what share of its burden?When demand is perfectly inelastic, who bears the burden of a per-unit tax?Which elasticity measures the effectiveness of a campaign in generating new sales?Cross elasticity of demand relates the quantity demanded of good A to the change in what?Along a straight-line demand curve, price elasticity of demand is what?