Answer to Question #221326 in Microeconomics for Lebogang

Question

When the price of erasers increases from R1,50 to R2,50, the quantity demanded of pencils is unchanged. The cross elasticity of demand between erasers and pencils is _____because erasers and pencils ___

A. 0; are normal goods
B. 0,5; are complements
C. 0; are unrelated
D. 1; are substitutes

Answer 1

C. 0; are unrelated

Cross elasticity = percentage change in quantity demanded of pens ÷ percentage change in the price of of pencils

Cross elasticity = $\frac{0}{[250-150]}=0$