Your local bakery gives you information on consumer purchasing habits for muffins and cupcakes. It tells you that, when the pric

Question

2 years ago

9

Your local bakery gives you information on consumer purchasing habits for muffins and cupcakes. It tells you that, when the pric

e of a muffin is $1, people buy 55 cupcakes. When the price of a muffin is raised to $2, cupcake purchases go up to 65 cupcakes. The cross-price elasticity of demand is: Select one: a. 0.50. b. 4.00. c. 0.25. d. 0.67. e.

Business

1 answer:

raketka [301] · Answer 1 · 2022-09-19T21:33:37+03:00

Answer:

c. 0.25

Explanation:

Cross-price elasticity = [(Q2-Q1/)((Q1-Q2)/2) * 100] / [(P2-P1/)((P1-P2)/2) * 100]

Cross-price elasticity = [(65-55)/((65+55)/2)*100] / [(2-1)/((1+2)/2)*100]

Cross-price elasticity = 16.6667/66.6667

Cross-price elasticity = 0.25000037

Cross-price elasticity = 0.25