Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is S2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross - price elasticity of demand for beans and rice is A. - 0.71, and they are complements B. 0.71, and they are substitutes. C. 1.4, and they are substitutes D. - 1.4, and they are complements

B. 0.71, and they are substitutes

Explanation:

The computation of the cross - price elasticity of demand is shown below:

= (change in quantity demanded : average of quantity demanded) : (percentage change in price : average of price)

where,

Change in quantity demanded is

= Q2 - Q1

= 4 - 3

= 1

And, average of quantity demanded is

= (4 + 3) : 2

= 3.5 0.2857

Change in price is

= P2 - P1

= $3 - $2

= $1

And, average of price is

= ($3 + $2) : 2

= 2.5

So, after solving this, the cross price elasticity of demand is + 0.7 and it refers to the substitutes goods