Firm A faces a price elasticity of demand of -2.5 and a cross-price elasticity of demand with
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Question:
Firm A faces a price elasticity of demand of -2.5 and a cross-price elasticity of demand with Firm B's product of 0.75. If Firm B leaves its price unchanged when Firm A lowers its price by 5%, then the change in Firm A's quantity sold will be
a)a fall of 25%
b) a fall of 12.5%
c)a rise of 12.5%
d)a rise of 25%
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