Ask Question
16 February, 13:48

When the price of flowers increased from $5.00 to $5.70, the quantity demanded of chocolate increased from 5,550 to 6,150. What is the estimated cross-price elasticity of demand for chocolate? Round your answer to the nearest hundredth.

+4
Answers (1)
  1. 16 February, 17:35
    0
    Answer:cross-price elasticity of demand = 1.57

    Explanation:

    The Cross Price Elasticity of Demand measures the degree at which the quantity demanded for one commodity changes with a change in price of another product. If the two products in comparison show a positive cross elasticity of demand, then both products are substitutes of each other, while a negative results shows both are complementary of each other.

    Cross Price Elasticity of Demand = ΔQx/Qx / ΔPy/Py

    Cross Price Elasticity of Demand = (Q1x - Q0x) / (Q1x + Q0x) : (P1y - P0y) / (P1y + P0y),

    Q0X = Initial demanded quantity of commodity X = 5500

    Q1X = Final demanded quantity of commodity X, = 6150

    P0Y = Initial price of commodity Y = $5.00

    P1Y = Final price of commodity Y = $5.70

    Cross Price Elasticity of Demand = (Q1x - Q0x) / (Q1x + Q0x) : (P1y - P0y) / (P1y + P0y)

    = (6150 - 5000) / (6150+5000) / (5.70-5.00) / (5.70 + 5.00)

    (1,150/11,150) / (0.7/10.7) = 0.103139/0.065420 = 1.5765 to the nearest hundreths = 1.57

    A positive value 0f 1.57 for cross elasticity of demand shows that there is a competitive relationship between chocolate and flowers.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “When the price of flowers increased from $5.00 to $5.70, the quantity demanded of chocolate increased from 5,550 to 6,150. What is the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers