Price X Y
20 40 50
30 40 40
40 60 50
50 55 60
60 60 40
70 70 60
1. Find the cross elasticity of commodity X and Y when price changed from
i. 20 to 30
ii. 40 to 50
iii. 60 to 70
2. Interpret your answers in I, ii and iii above
Cross Price Elasticity
20 to 30
40 to 50
60 to 70
Interpretation
20 to 30
With a zero cross price elasticity, it can be interpreted as good X and Y are neither substitutes nor complements.
40 to 50
With a negative cross price elasticity of demand, the quantity of good X demanded reduces with the increase in price of good Y.
60 to 70
With a cross price elasticity equal to one, it symbolizes a unitary elasticity where, a unit change in price of good Y results to a unit change in demand for X.
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