Question

Question 7 Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean? O If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. OA1 percent decrease in the price of grapefruit juice leads to a6 percent increase in orange juice consumption The demand for orange juice is 6 times greater than the demand for grapefruit juice. A6 percent increase in the price of grapefruit juice leads to a 1 percent increase in orange juice consumption. A Moving to another question will save this response

Answer 1

Cross elasticity of demand between grapefruit juice and orange juice = 6.

Cross elasticity of demand = (% change in quantity demanded of orange juice / %change in price of grape fruit juice) . And because cross elasticity is positive ,which means these two are substitutes.So, increase in the price of one good would lead to increase in the demand for other good.

This means that a 1 percent decrease in the price of grapefruit juice leads to a 6 percent decrease in orange juice consumption.