TURN IN100%Normal textArlal11B IU AE = = E EE - E - EEX.I .1. I 2 . 3 4 5 I 6For the questions 5-8 calculate the cross-price elasticity of demand. Based on youranswer state if the products are complementary goods or if they are substitute goods.Headings you add to the document willappear here.5) Price of product X increases by 20%. Qd for product Y decreases by 60%.6) Price of product X increases by 5%. Qd for product Y increases by 1%.7) Price of product X decreases by 10%. Qd for product Y increases by 20%.US V O 12么

Answered: 5) Price of product X increases by 20%.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Cross price elasticity of demand between two goods is the responsiveness of change in demand for a good as the price of related good changes measured in terms of the percentage change.

Cross price elasticity of demand between two goods = $\frac{Percentage change in Quantity demanded of good (Y)}{Percentage change in the price of its related good (X)}$

Given

% Change in Quantity demanded of good (Y) = 60%

% Change in Price of good (X) = 20%

Cross price elasticity of demand between two goods = $\frac{60 %}{20 %}$

Cross price elasticity of demand between two goods = (-)3

The negative cross-price elasticity represents that goods are complementary goods that is why a rise in the price of good X causes a fall in quantity demanded of good Y

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