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State and explain her price elasticity of demand

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Question - Ariana consumes two goods, food and clothing. The price of food is $4, the price of clothing is $10, and her monthly income is $2,000. Ariana always spends 40% of her income on food regardless of the price of food, the price of clothing or her income.

Required -

(i) State and explain her price elasticity of demand for food when its price increases by 25%, ceteris paribus.

(ii) State and explain her cross elasticity of demand for food with respect to the price of clothing, ceteris paribus.

Reference no: EM132469945

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