Cross Price Elasticity Challenge

Calculate the percentage change in price when the original price was $10 and the new price is $12.

• 20%

• 30%

• 10%

• 50%

If the quantity demanded of good A increases by 20% when the price of good B decreases by 10%, what is the cross price elasticity of demand between goods A and B?

• 1.5

• 2

• 3

• 0.5

Explain the concept of cross price elasticity of demand and how it differs from own price elasticity of demand.

• Own price elasticity measures the responsiveness of the quantity demanded of one good to a change in the price of another good

• Cross price elasticity measures the responsiveness of the quantity demanded of a good to a change in its own price

• Cross price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good, while own price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its own price.

• Cross price elasticity and own price elasticity are the same concept

Apply the formula for cross price elasticity of demand when the quantity demanded of good X changes from 100 to 120 units in response to a price change from $5 to $4 for good Y.

• 0.75

• 2.50

• 3.00

• -0.8181

Analyzing the relationship between two goods, if the cross price elasticity of demand between goods C and D is -1.5, what can you infer about the relationship between the two goods?

• Unrelated goods

• Complementary goods

• Substitute goods

• Inferior goods

Determine the quantity demanded of related goods when the cross price elasticity of demand is 0.8 and the percentage change in price is 15%.

• 5%

• 20%

• 30%

• 12%

Calculate the percentage change in price when the original price was $8 and the new price is $10.

• 100%

• 25%

• 10%

• 50%

If the quantity demanded of good M decreases by 15% when the price of good N increases by 20%, what is the cross price elasticity of demand between goods M and N?

• -0.75

• 2.00

• 0.50

• 1.25

Explain the concept of cross price elasticity of demand and provide an example of two goods with a positive cross price elasticity.

• Pencils and erasers. If the price of pencils increases, the demand for erasers may also increase as consumers switch to the cheaper alternative.

• Bread and butter. If the price of bread increases, the demand for butter may also increase as consumers switch to the cheaper alternative.

• An example of two goods with a positive cross price elasticity is coffee and tea. If the price of coffee increases, the demand for tea may also increase as consumers switch to the cheaper alternative.

• Cars and bicycles. If the price of cars increases, the demand for bicycles may also increase as consumers switch to the cheaper alternative.

Apply the formula for cross price elasticity of demand when the quantity demanded of good P changes from 80 to 100 units in response to a price change from $6 to $5 for good Q.

• -0.4

• 0.6

• -1.2

• 2.5