Suppose the demand function is Q x d = 100 ? 8P x + 6P y - M. If P x = $4, P y =

Question

Suppose the demand function is Qxd = 100 ? 8Px + 6Py - M. If Px = $4, Py = $2, and M = $10, what is the cross-price elasticity of good x with respect to the price of good y?
Suppose the demand function is Qxd = 100 ? 8Px + 6Py - M. If Px = $4, Py = $2, and M = $10, what is the cross-price elasticity of good x with respect to the price of good y?
Suppose the demand function is Qxd = 100 ? 8Px + 6Py - M. If Px = $4, Py = $2, and M = $10, what is the cross-price elasticity of good x with respect to the price of good y?
Suppose the demand function is Qxd = 100 ? 8Px + 6Py - M. If Px = $4, Py = $2, and M = $10, what is the cross-price elasticity of good x with respect to the price of good y?
Suppose the demand function is Qxd = 100 ? 8Px + 6Py - M. If Px = $4, Py = $2, and M = $10, what is the cross-price elasticity of good x with respect to the price of good y?

Explanation / Answer

The simple formula that you need to know for calculating any elasticity is: (V2-V1)/V1 x 100. Where V1 is the original value, and V2 is the second one. It's just a percentage change formula.

For cross price elasticity of demand, you get the percentage change in the demand for good a over the percentage change in the price for good b.

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