Question

Suppose the cross price elasticity of demand between avocados and times is -1.56 (E avocados/limes - -1.56) If the price of limes increases by 4.31%, we would expect the quantity of avocados demanded to change by % Round your answers to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.If the answer is -10.5% (-10.5% = -105) input-10.5

Answer 1

Ans.

The cross-price elasticity of demand between avocados and limes = % change in the quantity demand of avocados/ % change in the price of limes

- 1.56 = % change in the quantity demand of avocados/ 4.31%

% change in the quantity demand of avocados = ( - 1.56) x 4.31%

= - 6.72 %

Hence, the quantity demand for avocados decreases by 6.72 % when the price of limes increases by 4.31%.