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8. Refer to the In the News below: In the News: SUV Sales Drop with Gasoline Price Rise Analysts say that with the increase

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Answer #1

Cross price elasticity of demand=
%change in quantity demanded of good B/ %change in price of good A.

% change in demand of SUV =(-) 1%

% change in price of gasoline = 5%

Cross elasticity= 1/5
Cross price elasticity of demand between SUV and gasoline = 0.2

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