A. A rise in the price of coffee from S 1.5 to $2.8 results in a rise in the quantity of tea demanded from 200 packets to 260 packets a day. Calculate the cross clasticity of demand will be approximately and explain the relationship between the two goods. B. If the quantity of banking services demanded increases by 5 per cent when the price of banking services falls by 5 per cent, is the demand for banking services inelastic, elastic, or unit elastic? Justify your answer.

A. A rise in the price of coffee from S 1.5 to $2.8 results in a rise in the quantity of tea demanded from 200 packets to 260 packets a day. Calculate the cross clasticity of demand will be approximately and explain the relationship between the two goods. B. If the quantity of banking services demanded increases by 5 per cent when the price of banking services falls by 5 per cent, is the demand for banking services inelastic, elastic, or unit elastic? Justify your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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