Homework Answers
Answer
Option 2
0.42
cross price elasticity of demand=(change in quantity/average
quantity)/(change in price/average price)
Change in quantity=800-750=50
average quantity=(800+750)/2=775
change in price=14-12=2
average price=(12+14)/2=13
cross price elasticity of demand=(50/775)/(2/13)
=0.419354839
=0.42
the good is substitute good as the elasticity is positive.
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