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

Perceived value pricing, Perceived Value Pricing This refers to a prici...

Perceived Value Pricing This refers to a pricing strategy that dictates that the price of a given item will be set based on the customer's perception of the value of that item

Explain about the optimal consumption rule, Explain about the optimal consu...

Explain about the optimal consumption rule. The optimal consumption rule: While a consumer maximizes utility, the marginal utility per dollar spent should be similar for all

Company, what the company do?

what the company do?

Equilibrium, short run equilibrium of the industry

short run equilibrium of the industry

Snob appeal possibility, Situation is where a luxury is there. There is the...

Situation is where a luxury is there. There is the snob appeal possibility where the higher the price, the more desired the commodity it.  Often people will drive expensive cars, e

Evironmental issues and elasticity, looking for information to complete ess...

looking for information to complete essay, info looking for What is elasticity and its calculations for the price of a lap top, that increases by 20% and there is a 40% drop in qua

Steam question, Processors of aseptically packaged juice-based beverages mu...

Processors of aseptically packaged juice-based beverages must adequately heat their product before packaging it in order to be sure that they have “killed” the microorganisms which

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