After a careful statistical analysis, the Chidester Company concludes the demand function for its product isQ = 500 - 3P + 2Pr + 0.1Iwhere Q is the quantity demanded of its product, P is the price of its product, Pr is the price of its rival’s product, and I is per capita disposable income (in dollars). At present, P = $10, Pr = $20, and I = $6,000. What is the cross- price elasticity of demand between its product and its rival’s product?  a.0.0388  b.0.0721  c.0.0360 d.-0.0360

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Asked Sep 4, 2019
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After a careful statistical analysis, the Chidester Company concludes the demand function for its product is

= 500 - 3+ 2Pr + 0.1I

where is the quantity demanded of its product, is the price of its product, Pr is the price of its rival’s product, and is per capita disposable income (in dollars). At present, = $10, Pr = $20, and = $6,000.

 

What is the cross- price elasticity of demand between its product and its rival’s product?

 

  a.

0.0388

 

  b.

0.0721

 

  c.

0.0360



  d.

-0.0360

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Expert Answer

Step 1

The formula of Price Elasticity...

Price
Elasticity
of Demand
% Change in the Quantity Demanded (AQ)
% Change in the Price (A P)
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Price Elasticity of Demand % Change in the Quantity Demanded (AQ) % Change in the Price (A P)

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