One winter recently, the price of a cruise increased by 10 percent and the quant
ID: 1257245 • Letter: O
Question
One winter recently, the price of a cruise increased by 10 percent and the quantity demanded decreased by 15 percent, and with no change in the price of cruise wear, the quantity of cruise wear demanded decreased by 20 percent. What is the cross elasticity of demand for cruise wear with respect to the price of a cruise? The cross elasticity of demand for cruise wear with respect to the price of a cruise is Cruises and cruise wear are because complements; the cross elasticity of cruise wear with respect to the price of a cruise is negative complements; the cross elasticity of cruise wear with respect to the price of a cruise is positive substitutes the cross elasticity of cruise wear with respect to the price of a cruise is negative complements; the price elasticity of demand for both goods is positive substitutes; the cross elasticity of cruise wear with respect to the price of a cruise is positiveExplanation / Answer
Cross elasticity fo cruise wear = % change in demand for cruise wear / % change in the price of cruise
= -20% / 10% = -2
Option A is correct as cruise and cruise wear are complements because the Cross elasticity fo cruise wear with repect to price of cruise is negative.
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