Question

Q1: If a 10 percent rise in the price of coffee increases the quantity of tea...

Q1: If a 10 percent rise in the price of coffee increases the quantity of tea demanded by 25 percent and decreases the quantity of coffee demanded by 20 percent,

Calculate price elasticity of coffee

Q2:

Calculate the cross-elasticity of demand between coffee and tea.

Homework Answers

Answer #1

I will appreciate if give positive rating

part A

price elasticity of coffee= Percentage change in demand of coffee/ percentage change in price of coffee

price elasticity of coffee= (-) 20%/ 10%

= (-)2

Absolute value is 2

price elasticity of coffeeis 2 .It represents price elasticity of coffee is more elastic.

Part B)

cross-elasticity of demand between coffee and tea=Percentage change in demand of tea/ percentage change in price of coffee

=25%/ 10%

cross-elasticity of demand between coffee and tea=2.5

cross-elasticity of demand between coffee and tea=2.5.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
When the price of a skateboard increases by 4 ​percent, the quantity of elbow pads demanded...
When the price of a skateboard increases by 4 ​percent, the quantity of elbow pads demanded decreases by 1 percent. Calculate the cross elasticity of demand for elbow pads with respect to the price of a skateboard.
A 10 percent increase in the price of soda leads to a 20 percent increase in...
A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that: a) elasticity of demand for soda 0.5 and is inelastic. b) elasticity of demand for iced tea is 2 and is elastic. c) cross-price elasticity of demand for soda is -0.5. d) cross-price elasticity of demand for iced tea is 2.
8. When the price increases by 30 percent and the quantity demanded drops by 30 percent,...
8. When the price increases by 30 percent and the quantity demanded drops by 30 percent, the price elasticity of demand is unitary elastic. elastic. perfectly inelastic. inelastic. perfectly inelastic. 9. If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5 percent, what is the percentage change in quantity demanded of Good B? -3 percent 1.50 percent 10 percent 3 percent -1.25 percent
A measure of the rate of percentage change of quantity demanded with respect to price, holding...
A measure of the rate of percentage change of quantity demanded with respect to price, holding all other determinants of demand constant is a. Income elasticity of demand b. Own price elasticity of demand c. Price elasticity of market equilibrium d. Cross price elasticity of demand The value of the income elasticity of demand coefficient for Good X is  given as 0.1. This means that a. as income increases by 10 percent, quantity demanded rises by 1 percent. b. as income...
When the price of Milo increases from RM2 to RM3, the quantity demanded decreases from 200...
When the price of Milo increases from RM2 to RM3, the quantity demanded decreases from 200 to 150 glasses per month. The demand for Nescafe increases from 50 to 100 glasses per month. (a) Calculate the price elasticity of demand using the midpoint formula. [10 marks] (b) If the price of Milo decreases, what will happen to the total revenue of Milo? Explain. [8 marks] (c) Calculate the cross elasticity of demand between Milo and Nescafe. Based on the answer,...
Bob views Tea and Scones as compliments. If the price of Scones increases: 1. Bob's Quantity...
Bob views Tea and Scones as compliments. If the price of Scones increases: 1. Bob's Quantity demanded of Scones will decrease and his demand for tea will increase 2. Bob's Quantity demanded of Scones will decrease and his demand for tea will decrease 3. Bob's demand for Scones will decrease and his demand for tea will increase 4. Bob's demand for Scones will decrease and his demand for tea will decrease
Two goods, tea and coffee, are related in such a way that when the price of...
Two goods, tea and coffee, are related in such a way that when the price of any one is varied, the demand for the other also varies. It was found that for consumers who are used to consume tea, the demand for tea fell from 240 kg to 220 kg when the price of coffee was decreased from its current price of Rs. 65/kg to Rs. 55/kg. Find out the cross elasticity of demand for tea and state the relationship...
Income Elasticity Exercise: When Jody's income increases by 10 percent and other things remain the same,...
Income Elasticity Exercise: When Jody's income increases by 10 percent and other things remain the same, Jody decreases the quantity demanded of macaroni and cheese by 20 percent and increases the quantity demanded of chicken by 5 percent. 2a. Calculate the income elasticity of demand for macaroni and cheese. 2b. Is macaroni and cheese a normal good or an inferior good? Why? 2c. Calculate the income elasticity of demand for chicken. 2d. Is chicken a normal good or an inferior...
5a)The price of car batteries increases by 10 percent and the quantity demanded decreases by 10...
5a)The price of car batteries increases by 10 percent and the quantity demanded decreases by 10 percent. What is the price elasticity of car batteries? Unit elastic, and revenue will not change Elastic, and revenue will increase Elastic, and revenue will decrease Inelastic, and revenue will increase b)Good A and Good B have negative income elasticities, but Good A is more negative than Good B. If the economy’s income increases, which of the following is true? Good A’s demand will...
If a 5 percent reduction in the price of coffee leads quantity demanded for coffee to...
If a 5 percent reduction in the price of coffee leads quantity demanded for coffee to increase by 10 percent, demand is: A.Elastic B.Perfectly elastic c.inelastic D.unit elastic
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT