Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Rakuten.com is 3.5. Based on this information, predict what happens when Amazon.com lowers its DVD prices by 10 percent. The quantity of DVDs demanded on Amazon.com will decrease by 35 percent. The quantity of DVDs demanded on Amazon.com will increase by 35 percent. The quantity of DVDs demanded on Rakuten.com will decrease by 35 percent. The quantity of DVDs demanded on Rakuten.com will increase by 35 percent.

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