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2 answers:
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Solution:
a. Find quantity demanded when P = $1.00 and = $2.00
Q = 10 - 2(1) + 2 = 10
Price elasticity of demand = ΔQ / ΔP =
(-2) =
= -0.2
Cross-price elasticity of demand = ΔQ / Δ
=
(1) = 0.2
b. When P = $2.00
Q = 10 - 2(2) + 2 = 8
Price elasticity of demand = ΔQ / ΔP =
(-2) =
= -0.5
Cross-price elasticity of demand = ΔQ / Δ
=
= 0.25