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Chapter 5: Q.22 (page 130)

What is the formula for the cross-price elasticity of demand?

Short Answer

Expert verified

Cross-priceelasticityofdemand=(dQ/dP')*(P'/Q)

Step by step solution

01

Definition

Cross Elasticity of Demand :

The cross elasticity of demand is a factor in the economy that assesses when responsive a quantity desired of one product is to price changes in another.

02

Explanation

The following is the formula: CROSS PRICE ELASTICITY OF DEMAND = %changeinquantitysoughtforProductA%changeinpriceforProductB As a result, we can use the following formula:

Cross-priceelasticityofdemand=(dQ/dP')*(P'/Q)

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Most popular questions from this chapter

What is the price elasticity of supply? Can you explain it in your own words?

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Why is the demand curve with constant unitary elasticity concave?

The average annual income rises from \(25,000 to \)38,000, and the quantity of bread consumed in a year by the average person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?

If demand is elastic, will shifts in supply have a larger effect on equilibrium quantity or on price?
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