Suppose the price of salt increases by 10 percent and, as a result, the quantity of pepper demanded (holding the price of pepper constant) increases by 1 percent.The cross-price elasticity of demand between salt and pepper is? (Enter your response rounded to two decimal places and include a minus sign if appropriate.) In this example, salt and pepper are?

A. complements,

B. not related,

C. substitute. Instead, suppose salt and pepper were complements. If so, then the cross-price elasticity of demand between saltand pepper would be. A.greater than 1. B. zero. C.greater than minus−1.

D. negative.

E. positive.

Lets first understand what elasticity of demand is. Elasticity of demand is the responsiveness of demand to changes in prices only. Now not all products are highly responsive to changes in prices. Such products whose demand changes significantly due to changes in price are referred to as Elastic products and those whose demand doesn't change that much as a result of changes in price are Inelastic products. Examples of inelastic products are, basic necessities like, bread, milk, eggs etc.

The elasticity of demand is measured by the change in quantity demand of a product upon change in price of that product. In this case the cross-price elasticity of demand between salt and pepper is= Change in quantity demand of pepper/ Change in price of Salt

= 1/10=0.1

0.1 elasticity of demand of a product means that product is price inelastic, which means the demand of the product doesn't change as hugely as it's price changes.