Answer to Question #81256 in Economics of Enterprise for Sayak halder

Question

The demand for petrol rises from 500 to 600 barrels when the price of a particular scooter is reduced from Rs. 25000 to Rs. 22000. Find out the cross elasticity of demand for the two. What is the nature of their relationship?

Answer 1

Сross elasticity of demand:
E = (500+600)/(25000+22000)×(600-500)/(22000-25000) = -11/14100
The petrol and the scooter are complementary goods, so cross elasticity of demand is negative