Question

5.4 Elasticity in Areas Other Than Price ractice 5.4 Elasticity in Areas Other Than Price Calculate cross-price elasticity of demand Question The price of cups increased from $3.75 to $4.05 and the quantity demanded of plates decreased from 4.950 to 4.450. Calculate the cross-price elasticity of demand for plates, Round your answer to the nearest hundredth Provide your answer below. FEEDBACK MORE INSTRUCTION TFG M

Answer 1

Solution & Explanation :-

CROSS PRICE ELASTICITY OF DEMAND ={ % change in quantity demanded for plates / % change in price of cups}

%change in quantity demanded for plates =[ (4450-4950)/4950] ×100

= - 0.10×100= - 10%

%change in price of cups = [(4.05-3.75)/3.75]×100

= 0.08×100= 8%

Therefore,

Cross price elasticity of demand = - 10%/8%

= - 1.25 Ans.

Here the cross price elasticity of demand is less than zero there both of the products are complements.