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17 October, 09:29

Suppose that Michael's Bowling Alley offers 50% off bowling on Mondays, and as a result, drink sales increase by 40%. What is the cross elasticity of demand between bowling and drinks?

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  1. 17 October, 13:01
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    -0.8

    Explanation:

    Cross elasticity of demand = % change in quantity demanded for the drink / % change in price of the bowling

    cross elasticity = 40% / - 50% = - 0.8 since the price was reduced the change in price will be negative
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