If the percent change in the quantity demanded for good X increases 10%, as the price...

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If the percent change in the quantity demanded for good X increases 10%, as the price...

If the percent change in the quantity demanded for good X increases 10%, as the price of good Y increases 5%, how do X and Y relate, if at all. calculate the cross price elasticity of demand

Microeconomics

business economics

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Answer 1

Answer #1

Increase in price of good Y = 5% . As a result ,Increase in quantity demanded for good X = 10%. This means that the good X and Good Y are substitutes because increase in price of one increases the price of other good.

Cross elasticity of demand = (% change in quantity demanded of good X / % change in price of good Y)

= (10/5)= 2.

Because cross elasticity is positive , this implies that good X and Y are substitutes.

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Answer 2

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