1. When the price of Good 1 changed from $80 per unit to $40 per unit, demand for Good 2 changed from 6000 units to 10,000 units. Calculate the appropriate elasticity. You will interpret your findings in the next question.Enter only numbers, a decimal point, and/or a negative sign as needed. Round your answer to two decimal places as necessary; if you round on intermediate steps, use four places.
2.
You must select all correct answers to get points for this question if more than one applies:
Goods 1 and 2 just described are:
Group of answer choices
unit elastic goods
elastic goods
complements
substitutes
inferior goods
normal goods
inelastic goods
(1) Price of good 1 changed from $80 to $40 as a result the demand for good 2 changed from 6000 units to 10,000 units
=> % change in price of good 1 = [(40-80) /80]*100 = -50
=>% change in demand for good 2 = [(10,000 - 6,000)/6000]*100 = 66.6666
Cross price elasticity of demand for good 2 w.r.t price of good 1 = (% change in demand for good 2/ % change in price of good 1)
=> Cross price elasticity of demand for good 2 w.r.t price of good 1 = (66.6666 / -50)
=> Cross price elasticity of demand for good 2 w.r.t price of good 1 =-1.33
Answer: Cross price elasticity of demand for good 2 w.r.t price of good 1 is -1.33
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(2)
Cross price elasticity of demand for good 2 w.r.t price of good 1 is negative, it implies that good 2 and good 1 are complements goods.
Answer: Complements goods.
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