If the quantity demanded of mutton increases by 5% when the

QUESTION
Q18) If the quantity demanded of mutton increases by 5% when the price of chicken increases by 20%, the cross-price elasticity of demand between mutton and chicken is

Try again

Correct

Try again

Solution:
The cross-price elasticity of demand measures the responsiveness of demand for one good to a change in the price of another good.
It is calculated as the percentage change in quantity demanded of one good divided by the percentage change in price of another good.
Here, if the quantity demanded of mutton increases by 5% when the price of chicken increases by 20%, then the cross-price elasticity of demand between mutton and chicken is 5/20 = 0.25.
Correct option is (b)

Chapter 1 Unit II questions