Answer to Question #53513 in Microeconomics for Arpit Bapna

Question

The price elasticity of demand for good X is known to be twice that of good Y. Price of X falls by 5%. Find the % change in X & Y quantities.

Answer 1

If the price elasticity of demand for good X is known to be twice that of good Y and the price of X falls by 5%, then the quantity of good X will rise by 5%*EdX and the quantity of good Y will rise by 5%*0.5*EdX.