Question

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. 

If we expect the price of jelly to decline by 15%, what is the expected change in the quantity 

demanded for peanut butter? 

Answer 1

If we expect the price of jelly to decline by 15%, then the expected change in the quantity demanded for peanut butter is -0.3×15 = -4.5%.