Suppose that the price of ice cream at your local cafeteria is €1.50 per scoop and 600 scoops per day are sold. Now, assume that at the same cafeteria, the price of frozen yogurt increases €1.25 to €1.75 per scoop. While nothing else has changed that could affect customers’ buying patterns, the sale of ice cream increased from 600 to 750 scoops per day. Calculate the cross elasticity of demand of ice cream relative to frozen yogurt. Are ice cream and frozen yogurt complements or substitutes? Explain your answer with the elasticity concept.
Suppose that the price of ice cream at your local cafeteria is €1.50 per scoop and 600 scoops per day are sold. Now, assume that at the same cafeteria, the price of frozen yogurt increases €1.25 to €1.75 per scoop. While nothing else has changed that could affect customers’ buying patterns, the sale of ice cream increased from 600 to 750 scoops per day. Calculate the cross elasticity of demand of ice cream relative to frozen yogurt. Are ice cream and frozen yogurt complements or substitutes? Explain your answer with the elasticity concept.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Elastic And Its Application
Section: Chapter Questions
Problem 7PA: Suppose that your demand schedule for pizza is as follows: a. Use the midpoint method to calculate...
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Suppose that the price of ice cream at your local cafeteria is €1.50 per scoop and 600 scoops per day are sold. Now, assume that at the same cafeteria, the price of frozen yogurt increases €1.25 to €1.75 per scoop. While nothing else has changed that could affect customers’ buying patterns, the sale of ice cream increased from 600 to 750 scoops per day.
- Calculate the cross elasticity of
demand of ice cream relative to frozen yogurt.
- Are ice cream and frozen yogurt complements or substitutes? Explain your answer with the elasticity concept.
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