Question

The quantity demanded of ground beef increased from 3,550 to 3,650 when the price of hamburger buns decreased from $1.65 to $1.15. Calculate the cross-price elasticity of demand for hamburger buns. Include a minus sign if elasticity is a negative number. Round your answer to the nearest hundredth.

Answer 1

the cross price elasticity of demand is -0.08

Step-by-step explanation:

The computation of the cross elasticity of demand is shown below:

As we know that

= (change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in price ÷ average of price)

where,

Change in quantity demanded is

= Q2 - Q1

= 3,650 - 3,550

= 100

And, average of quantity demanded is

= (3650 + 3,550) ÷ 2

= 3,600

Change in price is

= P2 - P1

= $1.15 - 1.65

= - 0.5

And, average of price would be

= ($1.15 + $1.65) ÷ 2

= 1.4

So, after solving this, the cross price elasticity of demand is -0.08