Question

Jack in the Box recently estimated that the cross price elasticity of demand for chicken sandwiches with respect to the price of burgers is -1.8. What percent change in unit sales of burgers will result from a 1% increase in the price of chicken sandwiches?

Answer 1

-1.8%

There would be a decrease in demand of 1.8%

Step-by-step explanation:

Cross price elasticity of demand measures the responsiveness of quantity demanded of good A to changes in price of good B.

If cross price elasticity of demand is positive, it means that the goods are substitute goods.

If the cross-price elasticity is negative, it means that the goods are complementary goods

Cross price elasticity = percentage change in quantity demanded / percentage change in price

-1.8 = percentage change in quantity demanded / 1%

percentage change in quantity demanded = -1.8%