The price elasticity of demand for scented candles is 15 The

The price elasticity of demand for scented candles is 1.5. The price elasticity of demand for tapered candles is 2 0 The crow elasticity of demand for tapered candles with respect to the price of a scented candle is 1.5. If the price of a scented candle rise by 4 percent, the percentage change m the price of a tapered candle that will lead to no change in the quantity demanded of tapered candles is percent.

Solution

If there is no condition:

Ec = (% change in quantity of tapered candle) / (% change in price of scented candle)

1.5 = (% change in quantity of tapered candle) / 4

Percentage change in quantity of tapered candle = 4 × 1.5

                                                            = 6 %

Ep = (% change in quantity of tapered candle) / (% change in price of tapered candle)

-2 = 6 / (% change in price of tapered candle)

Percentage change in price of tapered candle = - 3%

6% increase in quantity of tapered candle requires 3% decrease in price of tapered candle. If there is no increase in quantity, the price has to be increased by 3%.

Answer: 3 percent