quantity demand for tea has incerased from 100 to 160 units with an incerase in the price of the coffe powder from rs 40 to rs 50 . cacluate the cross elasticity of demand between tea and coffe the relationship between the goods
Answers
Answer:
Cross elasticity of demand =change in quantity demanded/Actual Demand *Actual Price /Change in Price.
60/100*40/10=2.4
Explanation:
E Is greater than 1
That is E=2.4
Cross elasticity of demand is 2.07
Explanation:
Answer - Cross elasticity of demand is 2.07
Calculation:
Initial quantity of tea, Qi = 100
Final Quantity of tea, Qf = 160
Initial price of coffee, Pi = 40
Final price of coffee , Pf = 50
The cross elasticity of demand refers to the degree of fluctuation of the quantity demanded one commodity due to the changes in the price of other commodity.
Cross Elasticity of Demand = [ (Qf – Qi) / (Qf +Qi) ] / [(Pf - Pi) / (Pf + Pi)]
Cross Elasticity of Demand = [ (160 – 100) / (160 +100) ] / [(50 - 40) / (50 + 40)]
= [60 / 260] / [10 / 90]
= [0.2307] / [0.1111]
= 2.07
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