You are the manager of a local flower shop and you compete with one other flower shop in your area. You estimate the cross-price elasticity of demand between your flowers and your competitor's flowers to be 2.60. If your competitor increases the price of her flowers by 4 percent, you should expect which of the following?
A) a 1.54 percent decrease in the demand for your flowers
B) a 1.54 percent increase in the demand for your flowers
C) a 10.4 percent decrease in the demand for your flowers
D) a 10.4 percent increase in the demand for your flowers
D) a 10.4 percent increase in the demand for your flowers
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What will be an ideal response?
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