5. Assume that the price of good X increased by 5% causing quantity demanded of good...
5. Assume that the price of good X increased by 5% causing quantity demanded of good of Y to increase 6%. We can assume good X and Y are what kind of goods? Work must be shown to prove your answer
Homework Answers
Cross price elasticity = % change in quantity demanded of Y / % change in price of good X = 6/5 = 1.2
So, an increase in the price of good X by 1% will increase quantity demanded of good Y by 1.2% . Therefore, good X and Y are substitutes.
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5. Assume that the price of good X increased by 5% causing
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