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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

Suppose the cross-price elasticity of apples with respect to the price of oranges is 0.4, and the price of oranges falls by 3%. What will happen to the demand for apples?

Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run? Why?

Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?

Under which circumstances does the tax burden fall entirely on consumers?

What is the formula for the wage elasticity of labor supply?
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