Question

Consider the market for _____.

Suppose the price of increases from ​$ to ​$ per . As a​ result, the demand for decreases from to _____. Using the midpoint​ formula, what is the​ cross-price elasticity of demand for ​? _____. ​(Enter a numeric response using a real number rounded to two decimal places.​ Don't forget the minus​ sign.) Suppose the​ cross-price elasticity of demand for with respect to the price of is . In this​ instance, and are ________ substitutes complements .

Answer 1

Note: The full question is attached as picture below

Cross price elasticity of demand = (P1 + P2)/(Q1 + Q2) x (Q2 - Q1)/(P2 - P1)

P1 = $1.5 , P2 = $1.75 (syrup)

Q1 = 292, Q2 = 272 (pancakes)

CPE (pancakes) = 3.25/564 x (-20/0.25)

CPE (pancakes) = -0.46

If the CPE of demand for pancakes w.r.t. the price of syrup is -0.15, pancakes and syrup are complements (complements have negative cross price elasticity).