Question

A manager at Target notices that when he lowered Chobani yogurt from $1.99 to $1.69 last week, the volume of Yoplait yogurt declined from 2000 to 1850 units. What’s the push elasticity of the demand for Yoplait with respect to the price of Chobani?

MULTIPLE CHOICE:
1.09
0.50
0.46
-1.09
-0.50

Answer 1

Price of Chobani Yogurt decrease from $1.99 to $1.69

=> % change in price of Chobani Yogurt =[(1.69 - 1.99) / 1.99] * 100

=> % change in price of Chobani Yogurt =-15.075%

Demand for Yoplait yogurt decreases from 2000 to 1850

=> % change in demand for Yoplait yogurt = [(1850 - 2000)/ 2000] *100

=> % change in demand for Yoplait yogurt = -7.5%

Cross Price elasticity of the demand for Yoplait w.r.t price of Chobani = ( % change in demand for Yoplait demand / % change in price of Chobani yogurt)

Price elasticity of the demand for Yoplait w.r.t price of Chobani = (-7.5) / (-15.075)

Price elasticity of the demand for Yoplait w.r.t price of Chobani = 0.4975

Price elasticity of the demand for Yoplait w.r.t price of Chobani = 0.5

Answer: Option (B)