the price of tea (Pr). The demand function is given by: Qc = 266 – 7Pc + 0.5Pr The price of coffee is Pc=10, and the price of tea is Pr=8. a) Calculate the price elasticity of the demand for coffee and the cross-price elasticity b) Are the two goods complements or substitutes?

the price of tea (Pr). The demand function is given by: Qc = 266 – 7Pc + 0.5Pr The price of coffee is Pc=10, and the price of tea is Pr=8. a) Calculate the price elasticity of the demand for coffee and the cross-price elasticity b) Are the two goods complements or substitutes?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The demand for coffee (Qc) in SDUS cafeteria depends on both the price of coffee (Pc) and
the price of tea (Pr). The demand function is given by:
Qc = 266 – 7Pc + 0.5Pr
The price of coffee is Pc=10, and the price of tea is Pr=8.
a) Calculate the price elasticity of the demand for coffee and the cross-price elasticity
b) Are the two goods complements or substitutes?

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