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WAEC Economics 2011 Question 7

Question 7

Elasticity

If a 20% rise in the price of Whisky leads to a 30% increase in quantity demanded of Schnapps, the cross elasticity of demand is

  1. A.3.0.
  2. B.2.5.
  3. C.2.3.
  4. D.1.5.
Show the answer and explanation

Answer: D (1.5.)

Explanation

Cross elasticity = % change in quantity of Schnapps ÷ % change in price of Whisky = 30 ÷ 20 = 1.5.