Asked by Clayton Scheutzow on Jul 27, 2024
Verified
If the cross-price elasticity of demand between fish and chicken is 2, then a 2% increase in the price of fish will result in a ________ in the quantity of chicken demanded.
A) 1% increase
B) 4% increase
C) 10% increase
D) 20% decrease
Cross-price Elasticity
A measure of how the demand for one product changes in response to a price change of another product, indicating substitutes or complements.
- Acquire knowledge about the theory of cross-price elasticity of demand and how it's applied in discerning the association between various goods.
Verified Answer
SA
Syazwani AzyanJul 31, 2024
Final Answer :
B
Explanation :
The cross-price elasticity of demand formula is (% Change in Quantity Demanded of Good B) / (% Change in Price of Good A). Given a cross-price elasticity of 2 and a 2% increase in the price of fish, the formula becomes: (X% Change in Quantity Demanded of Chicken) / (2% Change in Price of Fish) = 2. Solving for X gives a 4% increase in the quantity of chicken demanded.
Learning Objectives
- Acquire knowledge about the theory of cross-price elasticity of demand and how it's applied in discerning the association between various goods.
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