Question

Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per pound. She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound. Sandra’s cross-price elasticity of demand for coffee and milk is

A. 0.82, and they are substitutes.

B. -0.82, and they are complements.

C. 1.22, and they are substitutes.

D. -1.22, and they are complements.

Answer 1

B
Cross-price elasticity of demand =

Percentage change in quantity demanded of good 1 / Percentage change in the price of good 2

I did the work and that's what I got.

Answer 2

-0.82, and they are complements.