Answer:cross-price elasticity of demand= 1.57
Explanation:
The Cross Price Elasticity of Demand measures the degree at which the quantity demanded for one commodity changes with a change in price of another product. If the two products in comparison show a positive cross elasticity of demand, then both products are substitutes of each other , while a negative results shows both are complementary of each other.
Cross Price Elasticity of Demand= ΔQx/Qx /ΔPy/Py
Cross Price Elasticity of Demand = (Q1x – Q0x) / (Q1x+ Q0x) ÷ (P1y – P0y) / (P1y + P0y),
Q0X = Initial demanded quantity of commodity X =5500
Q1X = Final demanded quantity of commodity X, = 6150
P0Y = Initial price of commodity Y = $5.00
P1Y = Final price of commodity Y= $5.70
Cross Price Elasticity of Demand = (Q1x – Q0x) / (Q1x+ Q0x) ÷ (P1y – P0y) / (P1y + P0y)
= (6150 -5000)/ (6150+5000)/(5.70-5.00)/(5.70 +5.00)
(1,150/11,150)/(0.7/10.7)=0.103139/0.065420= 1.5765 to the nearest hundreths = 1.57
A positive value 0f 1.57 for cross elasticity of demand shows that there is a competitive relationship between chocolate and flowers.
