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

Utility maximization, u=2x^2+3y^2 hence income=310 birr and price=3 birr c...

u=2x^2+3y^2 hence income=310 birr and price=3 birr calculate quntity of x and y the optimize&minmize utilityfor the given income

MS6012 A01, Analyze the sustainable approach to waste reduction developed b...

Analyze the sustainable approach to waste reduction developed by the company you selected. Include the following: Its products Previous methods of production The way it implemented

Expected utility - consumer choice involving risk, Expected Utility: T...

Expected Utility: Theory Assume that a utility index exists which conforms to the five axioms. The expected utility for the two-outcome lottery L = (P, A, B) is given by,

Social welfare function, 2 i) Explain what are the key assumptions by the w...

2 i) Explain what are the key assumptions by the welfarist approach. ii) Define and discuss the properties of a Generalized Utilitarian social welfare function and represent it

What are the main weaknesses of using demand-side policies, What are the ma...

What are the main weaknesses of using demand-side policies? Trade-off issues a) Growth and low unemployment often come with inflation b) Government stimulatory policies m

Price mechanism, how does the prices system affect a country

how does the prices system affect a country

Profit maximization, Profits University creates student credit hours (y) wi...

Profits University creates student credit hours (y) with two inputs: Professors' hours of work (x1) and TAs' hours of work (x2) according to the manufacture function: f(x1,x2)= 10x

Long run economic profits, 1. Igora's pizzeria want to know if it should st...

1. Igora's pizzeria want to know if it should stay open this spring. Total Revenue will be $ 12,000 per week and Total Cost will be $ 18,000 per week. The fixed cost of running the

Long run eq, The raspberry growing industry is a perfectly competitive indu...

The raspberry growing industry is a perfectly competitive industry. The firms in the industry have a U-shaped LAC, minimum average cost is $8 and the minimum efficient scale is 4 u

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