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1 July, 00:14

If a 25 percent decrease in the price of sapphires causes a 15 percent decrease in the quantity of diamonds demanded, then the cross-price elasticity of demand between sapphires and diamonds is:

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  1. 1 July, 01:48
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    To solve for the cross-price elasticity of demand:

    Take the quantity of the diamonds demanded and divide it by the decrease in the price of sapphires.

    Cross-price elasticity of demand = 15/25

    Cross-price elasticity of demand = 0.6

    When you are solving for the cross-price elasticity of demand, you are seeing the response to the demand of a item when price changes for another good.
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