Answer to Question #240616 in Economics of Enterprise for nete

Question

The price for a good A has risen from 175 rub. to 210 rub. The demand for a good B has increased from 5400 units to 7100 units. Calculate the cross- price elasticity of demand?

Answer 1

Cross-price elasticity of demand$=$ $\frac {percentage change in quantity of B} {percentage change in price of A}$

Change in quantity of B:

(7100$-$ 5400)/ 5400$=$ 31.48%

Change in price:

$($ 210$-$ 175$)$ / 175$=$ 20%

Cross price elasticity of demand$=$ $\frac {31.48}{20}$

$=$ 1.574