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Rashid [163]
3 years ago
15

Rising peanut prices have forced peanut butter makers to raise the price of a jar of peanut butter from $2 to $3 per jar, causin

g quantity demanded to fall. In addition, sales of jelly also dropped by 15%. Using the midpoint method, calculate the cross elasticity of demand between peanut butter and jelly.
Business
1 answer:
Vanyuwa [196]3 years ago
7 0

Answer:

37.5%

Explanation:

The percentage change in the price of a jar of peanut butter, using the midpoint method, is:

P_B = \frac{3-2}{\frac{3+2}{2}}*100=40\%

The percentage change in sales of jelly is 15%.

The cross elasticity of demand between peanut butter and jelly is:

E = \frac{15\%}{40\%}*100\%\\E=37.5\%

The cross elasticity of demand is 37.5%

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