Question

Solve :

The cross elasticity of demand for muffins with respect to the price of a smoothie equals the percentage change in quantity of muffins demanded divided by the percentage change in the price of a smoothie.
When the price of a smoothie rises by $1 (from $2 to $3), the average price of a smoothie is $2.50.
So the price of a smoothie rose by ($1/$2.50) × 100, or 40%.
When the price of a smoothie rose by 40%, the quantity of muffins demanded increases from 80 million to 100 million, a change of 20 million.
The average quantity of muffins is 90 million, so the percentage change in the quantity of muffins is ( 20 million/90 million) × 100, which equals 22.2%.

Answer 1

The subject of this question is Mathematics. It involves the concept of cross-price elasticity of demand, which measures the responsiveness of the quantity demanded of one good to a change in the price of another good. In this case, we are calculating the cross elasticity of demand for muffins with respect to the price of a smoothie.

Step-by-step explanation:

The subject of this question is Mathematics. Specifically, it involves the concept of cross-price elasticity of demand, which is a measure of how the demand for one good changes in response to a change in the price of another good.

In this case, the question provides information about the percentage change in the price of a smoothie and the corresponding percentage change in the quantity of muffins demanded. Using this information, we can calculate the cross elasticity of demand for muffins with respect to the price of a smoothie.

The cross elasticity of demand formula is:

Cross elasticity of demand = (Percentage change in quantity of muffins demanded) / (Percentage change in price of a smoothie)

Substituting the given values:

Cross elasticity of demand = (22.2%) / (40%) = 0.555

Therefore, the cross elasticity of demand for muffins with respect to the price of a smoothie is 0.555.