Own price elasticity and cross price elasticity

Reference no: EM1311291

Let the market demand for rye bread be given by Q = 500 + I - 250P_rye + 400P_wheat, where Q is monthly demand in number of loaves, I is average monthly income in dollars, P_rye is the price of a loaf of rye bread, and P_wheat is the price of a loaf of wheat bread. If I = $1,000, P_rye = $2, and P_wheat = $3, calculate the following (based on 10% changes in denominators):

(a) the arc price elasticity of demand for rye bread

(b) the arc price elasticity of demand for wheat bread

Reference no: EM1311291

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