Question

The cross-price elasticity of demand between goods J and K is
. A 20 percent decrease in the price of good K will result in a -3


3 percent decrease in the quantity demanded of good K

Option A,3 percent decrease in the quantity demanded of good K

a

15 percent decrease in the quantity demanded of good K

Option B,15 percent decrease in the quantity demanded of good K

b

6 percent increase in the quantity demanded of good J

Option C,6 percent increase in the quantity demanded of good J

c

12 percent increase in the quantity demanded of good J

Option D,12 percent increase in the quantity demanded of good J

d

60 percent increase in the quantity demanded of good J

Answer 1

Answer: Option C — a 6% increase in quantity demanded of good J.

Reason: %ΔQ_J = (cross-price elasticity) × %ΔP_K = (−0.3) × (−20%) = +6%, so demand for J rises by 6% (they are complements).