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The quantity demanded of turkey decreased from 5,000 to 4,750 when the price of chicken decreased from $2.00 to $1.90. What is the estimated cross-price elasticity of demand for turkey

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Final answer:

The estimated cross-price elasticity of demand for turkey with respect to the price of chicken is 1.

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. In this case, we are calculating the cross-price elasticity of demand for turkey with respect to the price of chicken. The formula for cross-price elasticity of demand is:

Cross-price elasticity of demand = % change in quantity demanded of turkey / % change in price of chicken

To calculate the % change in quantity demanded of turkey, we use the formula:

% change in quantity demanded = (New quantity - Original quantity) / Original quantity

Similarly, to calculate the % change in price of chicken, we use the formula:

% change in price = (New price - Original price) / Original price

Plugging in the given values, we have:

  1. % change in quantity demanded of turkey = (4,750 - 5,000) / 5,000 = -0.05 or -5%
  2. % change in price of chicken = ($1.90 - $2.00) / $2.00 = -0.05 or -5%

Substituting these values into the formula for cross-price elasticity of demand, we get:

Cross-price elasticity of demand = -0.05 / -0.05 = 1

Therefore, the estimated cross-price elasticity of demand for turkey with respect to the price of chicken is 1.

User Stephen Edmonds
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