f the price of pork chops falls from $8 to $6, and this leads to an increase in demand for apple sauce from 100 to 140 jars, what is the cross-price elasticity of apple sauce and pork chops at a pork chop price of $6

Question

Business

Savanna Chang

16 June, 01:10

f the price of pork chops falls from $8 to $6, and this leads to an increase in demand for apple sauce from 100 to 140 jars, what is the cross-price elasticity of apple sauce and pork chops at a pork chop price of $6

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Answers (1)

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Ryan Levy · Answer 1

-1.6

Explanation:

The cross-price elasticity measures how sensible is the demand of a product when the price of another one changes. When the cross-price elasticity is negative, it means that when the price of a good decreases, the demand for the second one increases. When the cross-price elasticity is positive, it means that when the price of a good decreases, the demand for the second one also decreases.

Cross-price elasticity of the demand = Percent change in quantity of good A/Percent change in price of good B

Cross-price elasticity of the demand = (40/100) / (-2/8)

Cross-price elasticity of the demand=0.4/-0.25

Cross-price elasticity of the demand=-1.6

The cross-price elasticity of apple sauce and pork chops at a pork chop price of $6 is - 1.6.