If the price of jelly goes up by 10 percent, we observe a decrease in the quantity demanded of peanut butter of 20 percent. the

Question

mylen [45]

2 years ago

14

If the price of jelly goes up by 10 percent, we observe a decrease in the quantity demanded of peanut butter of 20 percent. the

cross-price elasticity of these goods is:

Business

1 answer:

Sedaia [141] · Answer 1 · 2022-05-09T16:00:59+03:00

Cross price elasticity refers to the measure of responsiveness of the quantity demanded of a product to a change in price of another good.
From the question given above,
cross price elasticity = -20% / 10% = -2.
The cross price elasticity for the goods above is - 2. Which means that the goods are not substitutes.
A positive cross price elasticity which is greater than zero means that the goods are substitutes.