Respuesta :
Answer:
The cross-price elasticity of demand between pepper and salt is -0.10
In this example, pepper and salt are complements
Instead, suppose pepper and salt were substitutes.
If so, then the cross-price elasticity of demand between prepper and salt would be: positive
Explanation:
The cross-price elasticity of demand will determinate how the effect of a complement or substitute prices impact on another good.
ΔQx / ΔPy = cross-price elasticity
(change in price of good X dividied by the change in price of good Y)
-0.02 / 0.20 = -0.1
They will be complement as the increase in price decrease the demand of the other good thus, the consumer uses these goods mutually not exclusively.
When positive, the goods are substitutes they compete among each other. Hence, price and quality variation moves consumers from one market into another (from salt to pepper or viceversa) when the price rises in one of them
Answer:
-0.1 %
Complements
Positive
Explanation:
The cross price elasticity of demand can be calculated by:
Cross-price elasticity of demand = %change in quantity demanded / %change in price
Cross-price elasticity of demand = -2/ 20 = -1/10 = -0.1 %
The cross-price elasticity of demand between pepper and salt is 0.1 %
In this example, pepper and salt are complements which means when the price of salt increases than there will be a decrease in the demand of pepper.
if pepper and salt were substitutes then cross-price elasticity of demand between pepper and salt would be positive since when two goods are substitutes then an increase in the price of x, causes an increase in the demand of y.
