Answered: Explain the cross-price elasticity of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Explain the cross-price elasticity of demand of I0GO yoghurt when the price of Yop yoghurt reduces?

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Introduction

Complementary goods are the ones which are used together such as bread and jam. Substitute goods are those which are used in place of one another as is the case in soft drinks.

The cross elasticity of demand for substitute goods is more than zero while the cross elasticity of demand for complementary goods is less than zero. If the cross elasticity of demand is equal to zero then the goods do not have any relationship with one another.

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