Asked by Brittani Barou on May 02, 2024
Verified
If the quantity of glazed donuts demanded increases by 6% when the price of cinnamon rolls increases by 9%, the cross-price elasticity of demand between glazed donuts and cinnamon rolls is
A) -1.5.
B) -0.33.
C) 0.67.
D) 1.5.
Cross-price Elasticity
A measure of how the quantity demanded of one good responds to a change in the price of another good, indicating the relationship between goods as substitutes or complements.
Glazed Donuts
Sweet pastries typically made of deep-fried dough coated with a thin layer of sugar glaze.
Cinnamon Rolls
A sweet baked pastry known for its spiral shape and cinnamon-spiced filling, often topped with icing or glaze.
- Develop an understanding of economic elasticity, focusing on price elasticity of demand, income elasticity, and cross-price elasticity.
- Analyze and clarify the price elasticity of demand by employing the given data set.
Verified Answer
YS
Yashashvi SharmaMay 09, 2024
Final Answer :
C
Explanation :
The cross-price elasticity of demand is calculated as the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. Here, it is (6% / 9%) = 0.67, indicating that glazed donuts and cinnamon rolls are substitutes.
Learning Objectives
- Develop an understanding of economic elasticity, focusing on price elasticity of demand, income elasticity, and cross-price elasticity.
- Analyze and clarify the price elasticity of demand by employing the given data set.