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Chapter 5: Q.32 (page 131)

Suppose you could buy shoes one at a time, rather than in pairs. What do you predict the cross-price elasticity for left shoes and right shoes would be?

Short Answer

Expert verified

Each shoe's cross-price elasticity is negative.

Step by step solution

01

Definition

Cross price elasticity of supply:

The cross-price elasticity of demand is the proportion of a change in the quantity requested for one commodity to a change in price for another. For complimentary items, it's a negative.

02

Explanation

In this case, the left and right shoes will compliment each other. As a result, a rise in the price of the left shoe will lead to a decrease in the quantity demanded of the right shoe, resulting in a negative cross-price elasticity.

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