how might the concept of cross-price elasticity of demand be useful when attempting to identify the impact of an increase in the price of petrol on the demand for cars , or the impact of reduction in the price of butter on the demand for margarine
Cross-price elasticity of a good x gives how much the demand for good x changes when the price of another related good y changes. It is given as Ex,y = Change in x/Change in price of Y = dx/dPy * Py/x
There are certain goods that are strongly related with some other good, such as price of petrol and demand for cars. The decision to buy a car hinges strongly on the price of petrol. If the price of petrol increases, it becomes more expensive to use a car. Therefore, demand for cars decrease. The cross-price elasticity is negative. The two goods are complements, that is, used together.
Butter and Margarine are two goods that can be used interchangeable without much difference in output. Therefore, when the price of butter decreases, people buy more butter and the demand for margarine decreases. The cross-price elasticity is positive.
how might the concept of cross-price elasticity of demand be useful when attempting to identify the...
2. A Calculate the cross-price elasticity of demand between bread and butter where a 20 percent decrease in the price of bread results in a 50 percent increase in the quantity of butter demanded. Explain your answer. B. Calculate the income elasticity of demand for sweaters where a 10 percent increase in income leads to a 25 percent decrease in the quantity of sweaters demanded at a given price. What type of a good is a sweater? Why?
2. A Calculate the cross-price elasticity of demand between bread and butter where a 20 percent decrease in the price of bread results in a 50 percent increase in the quantity of butter demanded. Explain your answer. B. Calculate the income elasticity of demand for sweaters where a 10 percent increase in income leads to a 25 percent decrease in the quantity of sweaters demanded at a given price. What type of a good is a sweater? Why?
For each of the following product pairs, what would you guess about their cross price elasticity of demand. Would you expect it to be positive or negative? Would you expect it to be a large or small number? Explain your answer? a) dress pants and belts b) gasoline and SUVs c) bread and bagels d) butter and margarine
26)What pair of goods is likely to have the largest cross-price elasticity in absolute value? Multiple Choice a)Ramen noodles and a Rolex watch b)Cross-price elasticity is always negative, and simply reported in absolute value. c)Butter and margarine d)Peanut butter and jelly 27)If the price of butter increases 5 percent and the amount of margarine purchased increases 25 percent, then the cross-price elasticity of these goods is: Multiple Choice a)0.2. b)- 0.2. c)5. d)- 5. 28)The determinants of price elasticity of...
a) CROSS ELASTICITY OF DEMAND: What would happen to the market demand for beer if the price of wine increased by 20%? You might want to distinguish between different types of beer. (Your answer should show you understand the concept of cross elasticity of demand.) b) INCOME ELASTICITY OF DEMAND: What would happen to the demand for fur coats if income went up by 20% What would happen to the demand for underwear if income went up by 20%. Again,...
The cross price elasticity of demand for peanut butter and jelly is: Select one: O a. Positive O b. Negative O c. Zero O d. There is no relationship ge hort Answers Jump to...
How can we prove the long linear demand function ? In own price elasticity , cross price elasticity Log-Linear Demand - General Log-Linear Demand Function: Own Price Elasticity: P Cross Price Elasticity: Py Income Elasticity : βΜ 3-25
Price Elasticity of Demand: Naturally Good Organics Price Elasticity of Demand measurers how changed in a price affect the quantity of the product demanded. Specifically, it is the ratio of the percentage change in quantity demanded to the percentage change in price. In order to understand how to plan a successful pricing program, marketers must understand how elastic or inelastic the consumers are to changes in price. In other words, to what extent will a price increase or decrease result...
This question focuses on the idea of cross price elasticity (in effect, peanut butter and jelly) and the idea of complements and substitutes. We analyze data to see how the price of one product will affect the demand for another product. If your company produced Pallets, and you are provided analysis such that the demand for Pallets is estimated to be Qa= 1000 – 0.75pa+ 12pX – 21pZ + 0.12Y Note that pa= 80, pX= 50, pZ= 150, and Y...
Find a real world example depicting price elasticity of demand. Be sure to explain how the concept of price elasticity demand would impact the seller's revenues should the seller choose to raise the price of the product.