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sveta [45]
3 years ago
9

3. Suppose the price of cereal rose by 25% and the quantity of milk sold decreased by 50%. We know that the: O cross-price elast

icity between cereal and milk is -2. O cross-price elasticity of demand between cereal and milk is 2. O price elasticity of demand for milk is 2. O cross-price elasticity between cereal and milk is -0.5.
Business
1 answer:
lianna [129]3 years ago
7 0

Answer:

The cross-price elasticity between cereal and milk is -2.

Explanation:

The price of cereal rose by 25% and the quantity of milk sold decreased by 50%. We know that milk and cereal are complements which means that they are consumed together.  

The cross-price elasticity of demand shows the change in quantity demanded of a good because of a change in the price of a related good.

Cross price elasticity

= \frac{\% \Delta Q}{\% \Delta P}

= \frac{-50}{25}

= -2

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