ECONOMICS (CBSE/UGC NET)

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ECONOMICS

ELASTICITY OF DEMAND

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
A 2% price cut for GOOD A causes GOOD B sales to fall by 3%. The price cross elasticity of demand between these goods is roughly ____ and these goods are ____
A
‑2/3, substitutes.
B
1.5, substitutes.
C
2/3, complements.
D
‑1.5, complements.
Explanation: 

Detailed explanation-1: -Answer and Explanation: When the price of a product increases from $3 to $4, the quantity demanded decreases from 90 to 70. The price elasticity of demand is-0.67.

Detailed explanation-2: -In the long run, a price increase from $2 to $4 has an elasticity of supply of 1.50.

Detailed explanation-3: -Answer and Explanation: If the price elasticity of demand for a good is 0.75, the demand for the good can be described as A. elastic. A good is inelastic if the quantity demanded tends to remain relatively constant despite changes in price.

Detailed explanation-4: -The cross-price elasticity formula is an equation for calculating the cross-price elasticity of demand (XED) of two separate products or services: Cross price elasticity (XED) = (% change in demand of product A) / (% change of price of product B), where products A and B are different offerings.

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