Evaluate cross price elasticity of demand

Reference no: EM1315600

"Consider a consumer who is currently allocating $200/week between good X (he buys 7.5 units of X at a price of $10) and good Y (PY = $25). Note his current allocation on an indifference model (plot with Excel) you may use the curve tool to add the actual indifference curve --no need to plot it). Next, assume PX falls to $5.00. Note the change on your model and assume his consumption of X rises to 20. What happens to his consumption of Y? Calculate the coefficient of price elasticity and of cross price elasticity. Also draw the demand curves for X and Y, noting the equilibrium points for this consumer before and after the price change in X. Label all diagrams and show your work."

Reference no: EM1315600

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