Respuesta :
Answer:
1.3
Explanation:
Given:
If Good C increases in price by 30% a pound.
This causes the quantity demanded for Good D to increase by 40%.
Question asked:
What is the cross-price elasticity of the two goods ?
Solution:
We can find the cross-price elasticity of the two goods by this formula:
[tex]E_{c} = \frac{ Percent\ change\ in \a \ quantity \ of \ good \ D}{Percent \ change\ in\ the\ price\ of \ good\ C}[/tex]
[tex]E_{c} = \frac{40}{30}= 1.3[/tex]
When Good C increases in price by 30% which causes the quantity demanded for Good D to increase by 40%, then the cross-price elasticity of the is Good C and Good D is 1.3.
The cross-price elasticity of Good C and Good D is 1.3.
What is cross-price elasticity?
Cross-price elasticity refers to the elasticity of a good when the price of another good change, either increase or decrease. In simple terms, cross-price elasticity refers to the change in quantity demanded of a good with respect to a change in the price of another good.
The cross-price elasticity can be measured for Good C and Good D as:
[tex]\rm Cross-price \:elasticity = \dfrac{Percentage\:change\:in\demand\:of\: D}{Percentage\:change\:in\:price\:of\:C}[/tex]
Given:
Increase in price of Good C is 30%
Increase in demand for Good D is 40%
Therefore the cross-price elasticity will be:
[tex]\rm Cross-price \:elasticity = \dfrac{Percentage\:change\:in\demand\:of\: D}{Percentage\:change\:in\:price\:of\:C}\\\\\rm Cross-price \:elasticity = \dfrac{40\%}{30\%}\\\\\rm Cross-price \:elasticity = 1.3[/tex]
Hence the cross-price elasticity is 1.3.
Learn more cross-price elasticity here:
https://brainly.com/question/26661565
