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2 answers:
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Answer:
-2, compliments
Step-by-step explanation:
The computation of the cross elasticity of demand is shown below:
Given that
(P1, Q1) = (7, 25)
(P2, Q2) =(5,50)
Now here we use the mid-point formula for determining the cross price elasticity
= [(Q2 - Q1) ÷ (P2 - P1)} × [(P1 + P2) ÷ (Q1 + Q2)]
= [(50 - 25) ÷ (5 - 7)] × (5 + 7) ÷ [(25 + 50)]
= -2
Hence, the cross-price elasticity is -2
It is negative so these are complementary goods
Hence, the correct answer is -2, compliments
