Explain why the cross elasticity of demand for substitute goods is positive and the crosselasticity of demand for complements is negative.

Cross elasticity of demand measures the responsiveness of changes in the demand for one good caused…

Answered: Explain why the cross elasticity of…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter6: Elasticities

Section: Chapter Questions

Problem 10P: If the midpoint on a straight-line demand curve is at a price of $7, what can we say about the...

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Similar questions

As the price of good X rises from 10 to 12, the quantity demanded of good Y rises from 100 units to 114 units. Are X and Y substitutes or complements? What is the cross elasticity of demand?
Suppose a straight-line downward-sloping demand curve shifts rightward. Is the price elasticity of demand higher, lower, or the same between any two prices on the new (higher) demand curve than on the old (lower) demand curve?
The quantity demanded of good X rises from 130 to 145units as income rises from 2,000 to 2,500 a month. What is the income elasticity of demand for good X?
What are the major determinants of a products price elasticity of demand? Studies indicate that the demand for Florida oranges, Bayer aspirin, watermelons, and airfares to Europe are elastic. Why?
Using the following equation for the demand for a good or service, calculate the price elasticity of demand (using the point form), cross-price elasticity with good x and income elasticity. Q=82P+0.10I+Px Q is quantity demanded, P is the product price. P1 is the price of a related good, and I is income. Assume that P= $10, I = 100, and Px = 20.
Evaluate the following statement: Along a downward-sloping linear demand curve, the slope and therefore the elasticity of demand are both 'constant.
If bus travel is an inferior good, its income elasticity of demand is a. strictly greater than 1. b. positive. c. equal to zero. d. negative.
Suppose Sally buys exactly five bars of English toffee each week, regardless of whether the toffee bars are regularly priced at 1 or on sale for 0.50. Based on this information, what is Sallys price elasticity of demand for English toffee in this price range? a. 0 b. 1 c. Infinity d. Cannot be determined.
If the price of a good or service increases and the total revenue received by the seller declines, is the demand for this good over this segment of the demand curve elastic or inelastic? Explain.
If the midpoint on a straight-line demand curve is at a price of $7, what can we say about the elasticity of demand for a price change from $12 to $10? What about from $6 to $4?
Estimates presented in Exhibit 5 show that Android users have a higher price elasticity of demand for apps in the Google Play Store than do iPhone users in the Apple App Store. Why might Android users tend to be more sensitive to app prices than iPhone users? What categories or types of apps (for example, games/social media) do you think have the highest price elasticities?
If the elasticity of demand for hamburgers equals 21.5 and the quantity demanded equals 40,000, predict what will happen to the quantity demanded of hamburgers when the price increases by 10 percent. If the price falls by 5 percent, what will happen?

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Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.