If a 20% rise in price of Whiskey leads to a 30% increase in quantity demanded of Schnapps, the cross elasticity of demand is

The cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. In this case, the 20% rise in the price of Whiskey leads to a 30% increase in quantity demanded of Schnapps. This means that the two goods are substitutes, as the increase in the price of Whiskey led consumers to switch to the relatively cheaper alternative, Schnapps. The formula for cross elasticity of demand is the percentage change in quantity demanded of good Y divided by the percentage change in the price of good X: Cross elasticity of demand = (% change in quantity demanded of Y) / (% change in price of X) Using the values given in the question, we can calculate the cross elasticity of demand as follows: Cross elasticity of demand = (30% / 20%) = 1.5 Therefore, the cross elasticity of demand is 1.5.