If Good C increases in price by 50 50 % a pound, and this causes the quantity demanded for Good D to increase by 60 % 60%, what is the cross-price elasticity of the two goods? Round your answer to one decimal place. What is the relationship between the two goods? no relationship substitutes complements

Question

Raina Santana

Business

20 June, 16:18

If Good C increases in price by 50 50 % a pound, and this causes the quantity demanded for Good D to increase by 60 % 60%, what is the cross-price elasticity of the two goods? Round your answer to one decimal place. What is the relationship between the two goods? no relationship substitutes complements

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Answers (2)

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Bennett Mcgrath · Answer 1

1.2 substitutes is the relationship between the two goods.

Kennedy Hines · Answer 2

Cross price elasticity = percent change in the quantity demanded of good D / percent change in the price of good C = 60% / 50% = 1.2

When the cross price elasticity between two groups is higher than 1, the goods are substitute of each other. This means that an increase in the price of good C will increase the quantity demanded of good D.