Answer: Cross price elasticity shows us the responsiveness of quantity demand to a change in price of the related goods (substitutes or complements). When cross price elasticity is positive the goods are substitute goods, while if it is negative the goods are complementary to each other.
The formula for it is given by,
[tex] Ec= \frac{Percentage change in quanity}{Percentage change in price of other good} [/tex]
[tex] 0.4= \frac{Percentage change in quantity}{10} [/tex]
[tex] Percentage change in quantity = 4 [/tex]
Thus, when price of broccoli rises by 10%, quantity demanded of eggplant rise by 4%. Consumers will start buying more eggplants as broccoli has become more expensive.
