Top Flight Stock currently sells for $53. A one-year call option with strike price of $58 sells for $10, and the risk-free inter
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Answer:
a. The percentage change in pizza prices is -25.00%.
b. The percentage change in pizza prices is 5.88%.
c. The cross elasticity of demand for pizza and skateboards is -23.53%.
We follow these steps to arrive at the answer.
<h3>a. Percentage change in price of pizza</h3>The percentage change in price of pizza using the midpoint formula is:
In this question, P₁ is $18 and P₂ is $14
Substituting the values in the formula above we get,
%
The percentage change in quantity of skateboards using the midpoint formula is:
In this question, Q₁ is 330 and Q₂ is 350
Substituting the values in the formula above we get,
%
We calculate the cross elasticity of demand as follows:
%