suppose Tinsel Town Videos lowers the price of its movie club membership by 10 percent and as a result, CineArts Videos experien

Question

3 years ago

8

ced a 16 percent decline in its movie club membership. What is the value of the cross- price elasticity between the two movie club memberships

1 answer:

alexandr402 [8] · Answer 1 · 2022-08-09T14:41:16+03:00

Answer: The value of cross price elasticity is 1.6.

Step-by-step explanation:

Since we have given that

Percent change in price = 10%

Percent change in quantity = 16%

So, we need to find the cross price elasticity between the two movie club memberships.

As we know the formula for cross price elasticity :

$\dfrac{\%\text{change in demand}}{\%\text{change in price}}\\\\=\dfrac{16}{10}\\\\=1.6$

Hence, the value of cross price elasticity is 1.6.