Cross-price elasticity of demand, Microeconomics

Assignment Help:

Cross-Price Elasticity of Demand is explained below:

Cross price elasticity of the demand is the percentage change in the quantity demanded of a particular good, with respect to the percentage change in price of another related good.

 

Pb?da = Percentage change in Demand for good a

               Percentage change in Price of good b

If, for instance, the demand for the butter rose by 2% when the cost of the margarine rose by 8%, then the cross cost elasticity of demand of butter with respect to price of margarine will be as follows.

 

Pb?da = 2% = 0.25

   8%

If, on the other hand, the price of bread (a compliment) rose, the demand for butter would decrease. If a 4% rise in price of bread led to a 3% fall in the demand for butter, the cross-price elasticity of demand for butter with respect to bread would become:

Pb?da = - 3% = - 0.75

   4%

 


Related Discussions:- Cross-price elasticity of demand

Protection of infant firms, Protection of infant firms: Infant industr...

Protection of infant firms: Infant industries are those firms, which are young. The absence of economies of scale to them makes their unit cost of production higher than older

S block elements, which is more dense-Rubidium or Rubidium Hydride?

which is more dense-Rubidium or Rubidium Hydride?

Implications of failures of policy implementation, IMPLICATIONS OF FAILURE...

IMPLICATIONS OF FAILURES OF POLICY IMPLEMENTATION: Given the phenomenon of policy failures, as indicated above, one often comes across the view that places the blame for these

What is gini coefficient, Q. What is Gini Coefficient? Gini Coefficient...

Q. What is Gini Coefficient? Gini Coefficient: A statistical measure of inequality. A Gini score of 0 signifies perfect equality (in which each individual receives the same inc

Economics 6th edition, What is the theory of absolute and comparative adva...

What is the theory of absolute and comparative advantage?

Cost, define cost its types with curves

define cost its types with curves

Total cost function, A firm's production function is given by Q = √LK . Th...

A firm's production function is given by Q = √LK . The price of labour is w and the price of capital is r. a. The price of labour is $5 and the price of capital is $20. What is

Calculate the expected value, 1) Investments 1A) What are the ...

1) Investments 1A) What are the two components to total return ?  What does expected value measure?  What does standard deviation measure?  How can each result be

Indirect Utility Function., M.Phil. Admission Test, 2017 Economics Model Qu...

M.Phil. Admission Test, 2017 Economics Model Question Group A Domain Knowledge in Economics Correct answer is as marked in black. Micro Economics 1. Consider a utility function U =

OLIGOPOLY, EXPLAIN KINKED DEMAND CURVE

EXPLAIN KINKED DEMAND CURVE

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd