For each scenario, calculate the cross-price elasticity between the two goods and identify how the goods are related. Pleaseuse the midpoint method when applicable, and specify answers to one decimal placeA 20% price increase for Product A causes a 10% decrease in its quantity demanded, but no change in the quantity demandedfor Product Brelationship between A and Bcross-price elasticity between A and BProduct C increases in price from $3 a pound to $4 a pound. This causes the quantity demanded for Product D to increasefrom 44 units to 85 unitsrelationship between C and Dcross-price elasticity between C and DWhen the price of Product E decreases 2%, this causes its quantity demanded to increase by 14% and the quantity demandedfor Product F to increase 17%relationship between E and Fcross-price elasticity between E and F

Question
Asked Sep 19, 2019
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For each scenario, calculate the cross-price elasticity between the two goods and identify how the goods are related. Please
use the midpoint method when applicable, and specify answers to one decimal place
A 20% price increase for Product A causes a 10% decrease in its quantity demanded, but no change in the quantity demanded
for Product B
relationship between A and B
cross-price elasticity between A and B
Product C increases in price from $3 a pound to $4 a pound. This causes the quantity demanded for Product D to increase
from 44 units to 85 units
relationship between C and D
cross-price elasticity between C and D
When the price of Product E decreases 2%, this causes its quantity demanded to increase by 14% and the quantity demanded
for Product F to increase 17%
relationship between E and F
cross-price elasticity between E and F
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For each scenario, calculate the cross-price elasticity between the two goods and identify how the goods are related. Please use the midpoint method when applicable, and specify answers to one decimal place A 20% price increase for Product A causes a 10% decrease in its quantity demanded, but no change in the quantity demanded for Product B relationship between A and B cross-price elasticity between A and B Product C increases in price from $3 a pound to $4 a pound. This causes the quantity demanded for Product D to increase from 44 units to 85 units relationship between C and D cross-price elasticity between C and D When the price of Product E decreases 2%, this causes its quantity demanded to increase by 14% and the quantity demanded for Product F to increase 17% relationship between E and F cross-price elasticity between E and F

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Expert Answer

Step 1

Cross price elasticity of demand: It refers to the degree of responsiveness of demand for one good with respect to a change in the price of its related goods. The related goods are of two types of Substitute goods and Complementary goods.

Substitute goods have competent demand. When the price of one good increase it leads to an increase in demand for its substitute goods. The value of cross-price elasticity for Substitutes goods is positive.

Complementary goods have joint demand they are always demanded together by the consumer like tea powder and sugar for making tea. When price of one good decrease it led to increase in demand for its complement good. The value of cross-price elasticity for complementary goods is negative.

Step 2

The formula for calculating cross-price elasticity is shown above:

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Cross Price Elasticity of demand=_%change in demand of a good %change in price of related good

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Step 3

A 20% increase in the price of product A cause a 10% decrease in its quantity demanded and no change in demand fo...

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Cross Price Elasticity of demand =change in demand of a good %change in price of related good Cross Price Elasticity of demand = %change in demand of good B %change in price of good A 0 Cross Price Elasticity of demand 20 Cross Price Elasticity of demand 0

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