question archive If when the price of product E decreases by 9%, this causes its quantity demanded to increase by 14% and the quantity demanded for product F to increase by 12%, then what is the cross-price elasticity of demand?
If when the price of product E decreases by 9%, this causes its quantity demanded to increase by 14% and the quantity demanded for product F to increase by 12%, then what is the cross-price elasticity of demand?
Subject:EconomicsPrice:2.88 Bought3
If when the price of product E decreases by 9%, this causes its quantity demanded to increase by 14% and the quantity demanded for product F to increase by 12%, then what is the cross-price elasticity of demand?
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Answer:-4/3
The only two pieces of information we need here is the percent price change of product E and percent quantity demanded change in product F. This is -9% and 12% respectively. Thus, CPED is -9%/12%=-4/3. This means the goods are complements.
