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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

As the price of good X rises from $10 to $12, the quantity demanded of good Y rises from 100 units to 114 units. Are X and Y substitutes or complements? What is the cross elasticity of demand?

To determine

The cross elasticity of demand.

Explanation

The cross elasticity of demand (Ec) can be calculated using the following formula:

Ec=  ΔQdQaverage ΔPPaverage (1)

Here,

ΔQd is the change in quantity demanded.

Qaverage stands for the average of the two quantities demanded.

ΔP is the change in price.

Paverage stands for the average of the two prices

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