Question

One winter​ recently, the price of antique furniture increased by 10 percent and the quantity demanded decreased by 30 ​percent, and with no change in the price of refinishing products​, the quantity of refinishing products demanded decreased by 8 percent. What is the cross elasticity of demand for refinishing products with respect to the price of antique furniture​?

Answer 1

Answer:

The cross-price elasticity is - 0.8.

Explanation:

The price of antique furniture increased by 10 percent and the quantity demanded decreased by 30 ​percent, and with no change in the price of refinishing products​, the quantity of refinishing products demanded decreased by 8 percent.

The cross-price elasticity of demand measures the change in the demand for a product due to a change in the price of a related good. Negative cross-price elasticity means the goods are complements. Positive cross-price elasticity implies that the goods are substitutes.

Cross price elasticity  

= $\frac{\Delta Qy}{\Delta Px}$

= $\frac{-8}{10}$

= - 0.8  

The cross price elasticity is negative which means that the goods are complements.