If there is an increase in the price of tea by 10%. and the quantity demanded coffee increases by 2%, then find the cross elasticity of demand.
If there is an increase in the price of tea by 10%. and the quantity demanded coffee increases by 2%, then find the cross elasticity of demand.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 8QFR
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1)If there is an increase in the price of tea by 10%. and the quantity demanded coffee increases by 2%, then find the cross elasticity of demand .
2) According to a Honda press release on October 23, 2006, sales of the fuel-efficient four-cylinder Honda Civic rose by 7.1% from 2005 to 2006. Over the same period, according to data from the U.S. Energy Information Administration, the average price of regular gasoline rose from $2.27 per gallon to $2.57 per gallon. Using the midpoint method, calculate the cross-price elasticity of demand between Honda Civics and regular gasoline. According to your estimate of the cross-price elasticity, are the two goods complements or substitutes? (answer on the basis of data value)
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