Answer to Question #186943 in Microeconomics for Hessa

Question

Given the information in the case study, calculate thecross price elasticity of demand between personal cars and ride sharing services in the UAE.

Answer 1

Personal cars demand increases by 27% because of the offered discount as

ride sharing services increases by 1.75% due to rise of price of petrol.

Therefore,

Cross price elasticity of demand  =(%∆ of Quantity of good A )÷( %∆ of price of good B)

Percentage change of Quantity of personal cars (good A)=27%

Percentage change in sharing services(good B)=1.75%

$E_{AB} =\frac{27}{1.75}=15$

$=15$.42857143

$=15.43$