Question

The below table shows the quantity demanded of footballs and volleyballs at a local sports store for different combinations of prices of the 2 goods:

Price of Footballs	Price of Volleyballs	Quantity Demanded of Footballs	Quantity Demanded of Volleyballs
$20	$15	27	51
$20	$20	29	42
$25	$15	18	57
$25	$20	18	53

When volleyballs are priced at $15, the cross-price elasticity of volleyballs with respect to footballs is _________________ which implies that volleyballs are a ____________ (complement or substitute) to footballs

Answer 1

Cross price elasticity of volleyballs with respect to football is = (%change in volleyballs demamded)/(% change in price of footballs) = [(57-51)/51] / [(25-20)/20] = (6/51)/(5/20) = 8/27 = 0.2962

This implies that volleyballs are substitute to footballs as when prices of footballs increases from $20 to $25 then with that quantity demamded of volleyballs increases from 51 to 57 , thereby , meaning a demanding a substitute of football , that is , volleyball.