Answer to Question #165438 in Microeconomics for Prathiksha

Question

Suppose the demand for a product is given by Q_c=200 - 2P_t+P_c where Q_c is the quantity demand for coffee,P_c is the price of coffee,P_t is the price of the substitute good tea.The price of the substitute good is  ₹400/kg.Suppos P_c=₹650/kg,what is the price elasticity of demand?

Answer 1

$$p_t=400$$

$$p_c=650$$

$$Q=200-2\times400+650=50$$

$$E=1\times \frac {650}{50}=13$$