Answer to Question #119643 in Macroeconomics for Kulvir

Question

According to a ford press release on April 2013 , Quantity of fuel efficient for cylinder Ford fusion board rules by 4% in the first quarter from 2012 to 2013. Over the same. Cording to daughter from national resources Canada the average price of regular gasoline rose by 8.5%. calculate the gross price Elasticity of demand between Ford fusion and regular gasoline. according to your estimate of the cross price Elasticity are the two good compliments or substitutes? Does your answer make sense?

Answer 1

$4/8.5*100\%=47.06\%$

When price on regular gasoline increase the sales of Ford fusion increase too on 47.06%. It also meens that these two goods are substitutes.