In a market with two goods, tea and coffee, an increase in the price of coffee leads to a 5% increase in the quantity demanded for tea. If the initial price of coffee was $4.00 per unit and it increased by 20%, calculate the cross-price elasticity of demand between tea and coffee. Based on your calculation, are these goods substitutes or complements? 0.25; complements 4.0; substitutes 1.0; complements 0.25; substitutes

In a market with two goods, tea and coffee, an increase in the price of coffee leads to a 5% increase in the quantity demanded for tea. If the initial price of coffee was $4.00 per unit and it increased by 20%, calculate the cross-price elasticity of demand between tea and coffee. Based on your calculation, are these goods substitutes or complements? 0.25; complements 4.0; substitutes 1.0; complements 0.25; substitutes

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 17P: If a 10 decrease in the price of one product that you buy causes an 8 increase in quantity demanded...

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Using the following equation for the demand for a good or service, calculate the price elasticity of demand (using the point form), cross-price elasticity with good x and income elasticity. Q=82P+0.10I+Px Q is quantity demanded, P is the product price. P1 is the price of a related good, and I is income. Assume that P= $10, I = 100, and Px = 20.
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