Cross Elasticity Of Demand
b. Calculate elasticity of demand for Californians for a reduction in price?
Formula of elasticity of demand with reference to price
a. 18 to 16
Price elasticity of demand = %change in quantity demanded % change in price = (10,000 – 14,000) x 100 (18 – 16) = (-4000) x 100 (2) = -2000 /100 = -20
b. 16 to 14
Price elasticity of demand = %change in quantity demanded % change in price = (14000-18000) x 100
(16-14) = (-4000) x 100 (2) …show more content…
Explain whether demand for Californian is elastic or inelastic and how this would affect price and demand?
The demand for Californians is an elastic demand as the percentage change in quantity demanded is greater than the percentage change in price. Number of substitute products will influence this elasticity. Elastic demand means that demand for a product is sensitive to price changes. The affect that it would have on price and demand is that they would have an inverse relationship. Therefore, as the price of Californians increase, the demands for Californians decrease and vice versa.
d. Using Table 2, explain the idea of cross elasticity of demand for Californians. Cross elasticity shows the response of quantity demanded of one good to a change in the price of another.
CED = % change in Q demanded of good X
% change in price of good
Formula of elasticity of demand with reference to price
a. 18 to 16
Price elasticity of demand = %change in quantity demanded % change in price = (10,000 – 14,000) x 100 (18 – 16) = (-4000) x 100 (2) = -2000 /100 = -20
b. 16 to 14
Price elasticity of demand = %change in quantity demanded % change in price = (14000-18000) x 100
(16-14) = (-4000) x 100 (2) …show more content…
Explain whether demand for Californian is elastic or inelastic and how this would affect price and demand?
The demand for Californians is an elastic demand as the percentage change in quantity demanded is greater than the percentage change in price. Number of substitute products will influence this elasticity. Elastic demand means that demand for a product is sensitive to price changes. The affect that it would have on price and demand is that they would have an inverse relationship. Therefore, as the price of Californians increase, the demands for Californians decrease and vice versa.
d. Using Table 2, explain the idea of cross elasticity of demand for Californians. Cross elasticity shows the response of quantity demanded of one good to a change in the price of another.
CED = % change in Q demanded of good X
% change in price of good