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If the quantity demanded ofX commodity increases by 5% when the price of commodity increases by 20% the cross elasticity of demand is??. A.-0.25 B.0.25 C.-4.00 D.4.00 The answer is B. But why A option will not come.?
Most Upvoted Answer
If the quantity demanded ofX commodity increases by 5% when the price ...
Explanation:
Cross elasticity of demand measures the responsiveness of demand for one product to a change in the price of another product.
Cross Elasticity of Demand = % change in quantity demanded of X commodity / % change in price of Y commodity
Given that the quantity demanded of X commodity increases by 5% when the price of commodity Y increases by 20%, we can calculate the cross elasticity of demand as follows:
Cross Elasticity of Demand = 5% / 20% = 0.25
Therefore, option B is the correct answer.
Why option A is not correct:
Option A suggests that the cross elasticity of demand is -0.25, which would mean that the two goods are complements. However, the question does not provide any information about the relationship between the two goods. Therefore, we cannot assume that they are complements. The correct answer is based solely on the given information regarding the percentage change in quantity demanded and price.
Cross elasticity of demand measures the responsiveness of demand for one product to a change in the price of another product.
Cross Elasticity of Demand = % change in quantity demanded of X commodity / % change in price of Y commodity
Given that the quantity demanded of X commodity increases by 5% when the price of commodity Y increases by 20%, we can calculate the cross elasticity of demand as follows:
Cross Elasticity of Demand = 5% / 20% = 0.25
Therefore, option B is the correct answer.
Why option A is not correct:
Option A suggests that the cross elasticity of demand is -0.25, which would mean that the two goods are complements. However, the question does not provide any information about the relationship between the two goods. Therefore, we cannot assume that they are complements. The correct answer is based solely on the given information regarding the percentage change in quantity demanded and price.
Community Answer
If the quantity demanded ofX commodity increases by 5% when the price ...
The option But is right because... when price and QD increase.. the good refer to the luxuries and the demand curve is >1,DC is flatter n positively sloped.
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If the quantity demanded ofX commodity increases by 5% when the price of commodity increases by 20% the cross elasticity of demand is??. A.-0.25 B.0.25 C.-4.00 D.4.00 The answer is B. But why A option will not come.?
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If the quantity demanded ofX commodity increases by 5% when the price of commodity increases by 20% the cross elasticity of demand is??. A.-0.25 B.0.25 C.-4.00 D.4.00 The answer is B. But why A option will not come.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If the quantity demanded ofX commodity increases by 5% when the price of commodity increases by 20% the cross elasticity of demand is??. A.-0.25 B.0.25 C.-4.00 D.4.00 The answer is B. But why A option will not come.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the quantity demanded ofX commodity increases by 5% when the price of commodity increases by 20% the cross elasticity of demand is??. A.-0.25 B.0.25 C.-4.00 D.4.00 The answer is B. But why A option will not come.?.
If the quantity demanded ofX commodity increases by 5% when the price of commodity increases by 20% the cross elasticity of demand is??. A.-0.25 B.0.25 C.-4.00 D.4.00 The answer is B. But why A option will not come.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If the quantity demanded ofX commodity increases by 5% when the price of commodity increases by 20% the cross elasticity of demand is??. A.-0.25 B.0.25 C.-4.00 D.4.00 The answer is B. But why A option will not come.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the quantity demanded ofX commodity increases by 5% when the price of commodity increases by 20% the cross elasticity of demand is??. A.-0.25 B.0.25 C.-4.00 D.4.00 The answer is B. But why A option will not come.?.
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