Question

If the quantity demanded of beef increases by $5\%$ when the price of chicken increases by $20\%$, the cross-price elasticity of demand between beef and chicken is?

• A. $-0.25$
• B. $0.25$
• C. $-4$
• D. $4$

Answer 1

The correct option is B $0.25$

We know
Cross price elasticity $=\frac{\%\Delta Qx\left(beef\right)}{\%\Delta Py\left(chicken\right)}$
$=\frac{5\%}{20\%}=+0.25$.