1 The crossprice elasticity of Sassy Cola and Crinkly Cola i

1) The cross-price elasticity of Sassy Cola and Crinkly Cola is 0.69, where the percentage change in quantity is for Sassy Cola and the percentage change in price is measured for Crinkly Cola. Calculate the percentage that the quantity demanded of Sassy Cola will change if the price of Crinkly Cola increases by 6.0%. Enter your response to one decimal place, and enter a negative number if the quantity demanded decreases.

AND

2) The cross-price elasticity of bows and violins is -0.34, where the percentage change in quantity is for bows and the percentage change in price is measured for violins. Calculate the percentage that the quantity demanded of bows will change if the price of violins decreases by 12%. Enter your response to one decimal place, and enter a negative number if the quantity demanded decreases.

Solution

Q1. Cross-price elasticity of demand between Sassy Cola and Crinkly Cola = 0.69

% change (increase) in price of Crinkly Cola = 6%

Cross-price elasticity of demand between Sassy Cola and Crinkly Cola is measured as follows -

Cross-price elasticity = % change in quantity demanded of Sassy Cola/% change in price of Crinkly Cola

0.69 = % change in quantity demanded of Sassy Cola/6%

% change in quantity demanded of Sassy Cola = 4.1%

Thus, the percentage change in quantity demanded of Sassy Cola is 4.1%.

Q2. Cross-price elasticity of demand between bows and violins = -0.34

% change (decrease) in price of violins = -12%

Cross-price elasticity of demand between bows and violins is measured as follows -

Cross-price elasticity = % change in quantity demanded of bows/% change in price of violins

-0.34 = % change in quantity demanded of bows/-12%

% change in quantity demanded of bows = 4.1%

Thus, the percentage change in quantity demanded of bows is 4.1%.