Answer to Question #293190 in Economics of Enterprise for Juli

Question

When the price of good A is P 40/ pair, the quantity for good B is 500 units. When the price increases by P 10 per unit, the demand for good B increases by 100 units. Compute the cross-price elasticity and determine the type of good.

Answer 1

$E=\frac{\frac{600}{500}}{\frac{50}{40}}=0.96$

goods are called interchangeable

Е>0