Question

​If, in​ equilibrium, the​ cross-price elasticity between airline tickets and gasoline is 2.3​; when the price of the gasoline increases by 1​%, the quantity demanded of airline tickets increases by

Answer 1

Percentage change in quantity= 2.3%

Step-by-step explanation:

Price elasticity is define as a measure of responsiveness of quantity demanded to changes in price.

When price is highly elastic there is large change in quantity demanded to small change in price. While when it is inelastic quantity demanded is less responsive to changes in price.

Mathematically

Price elasticity= percentage change in quantity / percentage change in price.

2.3= percentage change in quantity/0.01

Percentage change in quantity= 2.3* 0.01

Percentage change in quantity= 0.023= 2.3%