If Good C increases in price by 30% a pound, and this causes the quantity demanded for Good D to increase by 40%, what is the cross-price elasticity of the two goods? Round your answer to one decimal place.

1.3

Explanation:

Given:

If Good C increases in price by 30% a pound.

This causes the quantity demanded for Good D to increase by 40%.

Question asked:

What is the cross-price elasticity of the two goods ?

Solution:

We can find the cross-price elasticity of the two goods by this formula:

When Good C increases in price by 30% which causes the quantity demanded for Good D to increase by 40%, then the cross-price elasticity of the  is Good C and  Good D is 1.3.

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