The value of cross- price elasticity of demand between goods X and Y is 1.25, while the cross-price elasticity of demand between goods X and Z is -2.0. Characterize X and Y and X and Z as substitute or complements. Concept Introduction: Cross Price Elasticity of demand: It refers to the degree of responsiveness to change in the quantity demanded of one product due to change in the price of another product. It can be calculated as follows: e x y = % c h a n g e i n q u a n t i t y d e m a n d e d o f p r o d u c t " x " % c h a n g e i n t h e p r i c e o f p r o d u c t " y " The goods will be substitute goods, if the cross price elasticity is positive, because any increase in the price of good "y", will increase the quantity demanded of good "x". The goods will be complemented goods, if the cross price elasticity is negative, because any increase in the price of good "y", will decrease the quantity demanded of good "x". Perfect Substitute goods: The two goods are perfect substitutes when they can be used in the place of each other. For example, tea and coffee. When the price of tea increases, the quantity demanded coffee rises. Perfect complements: The two goods are perfect complements when they can be used together. For example, ink and printer. When the price of ink rises, the quantity demanded printer falls.

Question

Want to see the full answer?

Answer 1

Question

Chapter 19, Problem 10P

To determine

The value of cross-price elasticity of demand between goods X and Y is 1.25, while the cross-price elasticity of demand between goods X and Z is -2.0. Characterize X and Y and X and Z as substitute or complements.

Concept Introduction:

Cross Price Elasticity of demand: It refers to the degree of responsiveness to change in the quantity demanded of one product due to change in the price of another product. It can be calculated as follows:

e xy = % change in quantity demanded of product "x" % change in the price of product "y"

The goods will be substitute goods, if the cross price elasticity is positive, because any increase in the price of good "y", will increase the quantity demanded of good "x".

The goods will be complemented goods, if the cross price elasticity is negative, because any increase in the price of good "y", will decrease the quantity demanded of good "x".

Perfect Substitute goods: The two goods are perfect substitutes when they can be used in the place of each other. For example, tea and coffee. When the price of tea increases, the quantity demanded coffee rises.

Perfect complements: The two goods are perfect complements when they can be used together. For example, ink and printer. When the price of ink rises, the quantity demanded printer falls.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

086 pts 400 Question 18 of 24 > © Macmillan integration-hub.macmillanlearning.com Integration Hub ↓ Micro-Economics Flashcards | Quizle = D Hint Submit Answe The graph shows the supply and demand curves of high-fructose corn syrup, a sweetener commonly used in the production of sweets and soda due to its low cost. In an effort to curb health issues, Congress puts an excise or commodity tax on corn syrup at $2 per liter. 1. Shade in the region of the graph representing the total tax revenue that this tax will generate. 2. Shade in the region of the graph representing the deadweight loss that this tax will generate. Price ($) per liter 10 9 Supply 8 7 60 5 3 2 Demand ↓ 0 0 1 2 3 4 5 6 7 8. 9 10 Quantity (millions of liters) 00 MacBook Air Tax Revenue Deadweight Loss 000 000 F4 AA DII DD L F5 F6 F7 F8 F9 F10 F11 % Attempt

what is defecit in economy?

what is economic? and whatis the different between microeconomic and economic?