An increase in the demand for chicken, from 8,000 to 12,000, was caused by an increase in the price of beef from \$4.50 to \$5.50. Therefore, the cross-price elasticity for these two products is:

• A. 0.5
• B. -2.0
• C. 2.0
• D. -0.5

Answer: (C)

Verified step by step guidance

1. Understand the concept of cross-price elasticity of demand, which measures the responsiveness of the quantity demanded of one good to a change in the price of another good. It is calculated as the percentage change in quantity demanded of the first good divided by the percentage change in price of the second good.
2. Calculate the percentage change in the quantity demanded of chicken. The initial quantity demanded is 8,000 and the new quantity demanded is 12,000. Use the formula: \( \text{Percentage Change in Quantity Demanded} = \frac{\text{New Quantity} - \text{Old Quantity}}{\text{Old Quantity}} \times 100 \).
3. Calculate the percentage change in the price of beef. The initial price is \$4.50 and the new price is \$5.50. Use the formula: \( \text{Percentage Change in Price} = \frac{\text{New Price} - \text{Old Price}}{\text{Old Price}} \times 100 \).
4. Substitute the calculated percentage changes into the cross-price elasticity formula: \( \text{Cross-Price Elasticity} = \frac{\text{Percentage Change in Quantity Demanded of Chicken}}{\text{Percentage Change in Price of Beef}} \).
5. Interpret the result: A positive cross-price elasticity indicates that the two goods are substitutes, meaning that an increase in the price of beef leads to an increase in the demand for chicken.