The question asks for the cross-price elasticity of tea with respect to the price of coffee.

Cross Price Elasticity Formula

Cross-price elasticity of demand ($E_{xy}$) measures the responsiveness of the quantity demanded for one good (good X - tea) to a change in the price of another good (good Y - coffee).

The formula used is:

$E_{xy} = \frac{\% \text{ Change in Quantity Demanded of Good X}}{\% \text{ Change in Price of Good Y}}$

Where:

• Good X = Tea
• Good Y = Coffee

We calculate the percentage changes as follows:

$ \% \Delta Q_x = \frac{Q_{x, final} - Q_{x, initial}}{Q_{x, initial}} \times 100\% $

$ \% \Delta P_y = \frac{P_{y, final} - P_{y, initial}}{P_{y, initial}} \times 100\% $

Calculating Percentage Changes

1. Percentage Change in Quantity Demanded of Tea ($\% \Delta Q_{tea}$):

• Initial quantity of tea ($Q_{tea, initial}$): 5 kg
• Final quantity of tea ($Q_{tea, final}$): 8 kg
• $ \% \Delta Q_{tea} = \frac{8 \text{ kg} - 5 \text{ kg}}{5 \text{ kg}} \times 100\% = \frac{3}{5} \times 100\% = 60\% $

2. Percentage Change in Price of Coffee ($\% \Delta P_{coffee}$):

• Initial price of coffee ($P_{coffee, initial}$): ₹ 25 per kg
• Final price of coffee ($P_{coffee, final}$): ₹ 35 per kg
• $ \% \Delta P_{coffee} = \frac{₹ 35 - ₹ 25}{₹ 25} \times 100\% = \frac{₹ 10}{₹ 25} \times 100\% = 0.4 \times 100\% = 40\% $

Calculating Cross Price Elasticity

Now, we plug these values into the cross-price elasticity formula:

$ E_{tea, coffee} = \frac{\% \Delta Q_{tea}}{\% \Delta P_{coffee}} $

$ E_{tea, coffee} = \frac{60\%}{40\%} = \frac{60}{40} = 1.5 $

Final Answer

The cross-price elasticity of tea is (+) 1.5. This positive value indicates that tea and coffee are substitute goods.