Answering the question, the cross-price elasticity of demand between pineapple juice and grape juice is: 2%
Cross elasticity of demand is an idea in economics that measures the sensitivity in the quantity of a particular product that is demanded when there is a change in the price of another product.
<h2>Further Explanation</h2>
Cross elasticity of demand is also known as the cost-price elasticity of demand.
To calculate the cross elasticity of demand, you have to divide the percentage in the advantage by the percentage change the price of another product.
Cross elasticity of demand can be expressed as:
CPEoD = %change in quantity Demanded For good A / % change in the price of good B
From the given question:
- Percentage change in quantity demanded for Good A = 10%
- Percentage change in the price of good B = 5%
If you substitute the value, then you have:
CPEoD = 10% / 5%
CPEoD = 2%
However, the value of the cross elasticity of demand can either be negative or positive depending on the status of the goods, that is, based on whether the goods are complement or substitute.
However, there are five types of income elasticity of demand and these include
- High
- Unitary
- Low
- Zero
- Negative
Therefore, the cross-price elasticity of demand between pineapple juice and grape juice is: 2%
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KEYWORDS:
- cross price elasticity of demand
- pineapple juice
- grape juice
- complement
- substitute
