Question

Faced with high gas​ prices, Americans are substituting smaller cars for SUVs. In April​ 2008, Toyota Yaris sales increased 46 percent and Ford Focus sales increased 32 percent from a year earlier. Sales of SUVs decreased by more than 25 percent in 2008 and Chevrolet Tahoe sales fell 35 percent.​ Full-size pickup sales decreased more than 15 percent in 2008 and Ford​ F-Series pickup sales decreased by 27 percent in April 2008. The effect of a downsized vehicle fleet on fuel consumption is unknown. In​ California, gasoline consumption decreased by 4 percent in January 2008 from a year earlier. The price of gasoline in January 2008 increased by about 30 percent from a year earlier.

The cross elasticity of demand for the Toyota Yaris with respect to the price of gasoline is

Answer 1

The cross elasticity of demand for the Toyota Yaris with respect to the price of gasoline is 1.53.

Step-by-step explanation:

The cross elasticity of demand for the Toyota Yaris with respect to the price of gasoline can be calculated by taking the percentage change in the quantity demanded of the Toyota Yaris and dividing it by the percentage change in the price of gasoline. Cross elasticity of demand measures how the demand for one good is affected by changes in the price of another good. In this case, the percentage change in quantity demanded of the Toyota Yaris (46%) can be divided by the percentage change in the price of gasoline (30%) to find the cross elasticity of demand.

Cross elasticity of demand = (percentage change in quantity demanded of Toyota Yaris) / (percentage change in price of gasoline)

Using the given values, the cross elasticity of demand for the Toyota Yaris with respect to the price of gasoline can be calculated as:

Cross elasticity of demand = (46% / 30%) = 1.53