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

How to calculate the cpi index, When measuring price levels in the economy ...

When measuring price levels in the economy (such as when calculating the CPI index), why is a weighted average used? Because we require giving greater emphasis to prices at whi

Ppf, You should find two articles, of which one should report on changes th...

You should find two articles, of which one should report on changes that make farming more productive (more food per acre, hour or other unit of inputs), and another about changes

Elasticity of demand, elasticity of demand for demand function Q=10-2p for ...

elasticity of demand for demand function Q=10-2p for decrease in price from Rs 3 to Rs 2

Definition, the definition of exceptional supply curve

the definition of exceptional supply curve

Theory of production, THEORY OF PRODUCTION: Production activities rela...

THEORY OF PRODUCTION: Production activities related to goods and services require inputs. Typically, the set of inputs includes labour, capital equipments and raw materials. T

Perfect competition in neoclassical economics, Q. Perfect Competition in ne...

Q. Perfect Competition in neoclassical economics? Perfect Competition: An abstract assumption, central to neoclassical economics, in that companies are so small that none can i

Illustrate clearly the concept of dummy variable trap, Problem: (a) Co...

Problem: (a) Consider the Classical Linear Regression Model (CLRM) Y i = α + βX i + ε i (i) Using the method of ordinary least squares (OLS), derive an expression for

Williamson''s model, williomson''s model of managerial discretion

williomson''s model of managerial discretion

Criticisms of world trade organisation, Criticisms of World trade organisat...

Criticisms of World trade organisation:   There are critics too of the WTO. It is believed that the WTO will emerge out destructive of biodiversity and people's livelihoods by

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