Question

When the price of erasers increases from $1.50 to $2.50, the quantity demanded of pencils is unchanged. The cross-price elasticity of demand between erasers and pencils is ________ because erasers and pencils are ________.a. 1; substitutesb. 1/2; complementsc. 0; normal goodsd. 0; unrelatede. −1/2; complements

Answer 1

The cross-price elasticity of demand between erasers and pencils is 0, indicating that they are unrelated goods.

Step-by-step explanation:

The cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. It is calculated as the percentage change in the quantity demanded of the first good divided by the percentage change in the price of the second good.

The given information states that when the price of erasers increases from $1.50 to $2.50, the quantity demanded of pencils remains unchanged. From this information, we can deduce that the cross-price elasticity of demand between erasers and pencils is 0.

Since the cross-price elasticity of demand is 0, erasers and pencils are considered unrelated goods.