Question

Jeffery Brooks has just landed a job as the produce manager for a large grocery store. The store manager mentioned that last summer a group of students had calculated that the cross elasticity of demand between cantaloupes and water melons to be $1.10. Jeffery should know that this means

people like cantaloupes 10% more than water melons. people like water melons 110% more than cantaloupes. a 10% increase in the price of cantaloupes will decrease the quantity demanded of water melons by 11%. a $1 increase in the cost of either product will decrease the quantity purchased by 110 units per day. a 10% increase in the price of cantaloupes will increase the quantity demanded of water melons by 11%.

Answer 1

Jeffery Brooks has just landed a job as the produce manager for a large grocery store. The store manager mentioned that last summer a group of students had calculated that the cross elasticity of demand between cantaloupes and water melons to be $1.10. Jeffery should know that this means
Answer will be-
a 10% increase in the price of cantaloupes will increase the quantity demanded of water melons by 11%.

Cross elasticity = %change in the quantity demanded of one related good / % change in the price of another related good.

In the question cantaloupes and water melons must be substitutes as the elasticity is positive.

A 10% increase in the price of cantaloupes will increase the quantity demanded of water melons by 11%.

Elasticity = 11%/10%=1.1

So answer will be a 10% increase in the price of cantaloupes will increase the quantity demanded of water melons by 11%.