Tea is priced at Rs 30 with 5 kg demanded. When the price of coffee rises from Rs 25 to Rs 35 per kg, the quantity of tea demanded rises from 5 kg to 8 kg. The cross-price elasticity of tea with respect to coffee is:

1. Use $E_c = \dfrac{\Delta q_x}{\Delta p_y}\times\dfrac{p_y}{q_x}$ with $x=$ tea, $y=$ coffee. 2. Here $\Delta q_x = 8-5 = 3$, $\Delta p_y = 35-25 = 10$, original $p_y = 25$, $q_x = 5$. 3. Substitute: $E_c = \dfrac{3}{10}\times\dfrac{25}{5} = \dfrac{3}{10}\times5$. 4. This equals $+1.5$. The positive sign shows tea and coffee are substitutes. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit I "Law of Demand and Elasticity of Demand", p.35_