-Based on data in the table above, use the midpoint method to determine the cross elasticity of demand for ice cream and cake.
A) The cross elasticity is -0.83.
B) The cross elasticity is -1.75.
C) The cross elasticity is -0.75.
D) The cross elasticity is -1.33.
E) The cross elasticity is -4.0.

Question

-Based on data in the table above, use the midpoint method to determine the cross elasticity of demand for ice cream and cake.
A) The cross elasticity is -0.83. 
B) The cross elasticity is -1.75. 
C) The cross elasticity is -0.75. 
D) The cross elasticity is -1.33. 
E) The cross elasticity is -4.0.

Quizplus · Accepted Answer

The midpoint method calculates the cross elasticity of demand by taking the percentage change in quantity demanded of one good divided by the percentage change in price of another good. The correct calculation results in -0.75.

-Based on Data in the Table Above, Use the Midpoint