Question

Cross-price elasticity of demand is calculated as the
total percentage change in quantity demanded divided by the total percentage change in price.
percentage change in the price of good 1 divided by the percentage change in the price of good 2.
percentage change in quantity demanded divided by the percentage change in income.
percentage change in quantity demanded of good 1 divided by the percentage change in the price of good 2.

Answer 1

Cross-price elasticity of demand is calculated as the

percentage change in quantity demanded of good 1 divided by the percentage change in the price of good 2.

Cross price elasticity measures the sensitivity in the demand of one product against the price change in the 2nd product.

Price elasticity formula: Exy = percentage change in Quantity demanded of X / percentage change in Price of Y.

% Qx = (Q1-Q2) / [1/2 (Q1+Q2)] where Q1 = initial Qd of X, and Q2 = new Qd of X.

% Py = (P1-P2) / [1/2 (P1 + P2)] where P1 = initial Price of Y, and P2 = New Price of Y.

Putting the two above equations together:

Exy = {(Q1-Q2) / [1/2 (Q1+Q2)] } / {(P1-P2) / [1/2 (P1 + P2)]}