Refer to the accompanying table to answer the following questions.
-The price of erasers increases from $0.50 to $1.00 per eraser.Using the midpoint method,what is the cross-price elasticity of demand between pencils and erasers?
A) -0.13
B) 7.67
C)-7.67
D) 0.13
E) -3

Question

Refer to the accompanying table to answer the following questions. 
-The price of erasers increases from $0.50 to $1.00 per eraser.Using the midpoint method,what is the cross-price elasticity of demand between pencils and erasers?
A) -0.13 
B) 7.67 
C)-7.67 
D) 0.13 
E) -3

Quizplus · Accepted Answer

The cross-price elasticity of demand is calculated as the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. In this case, the price of erasers increases from $0.50 to $1.00 per eraser, and the quantity demanded of pencils decreases from 100 to 75. The percentage change in the price of erasers is (1.00 - 0.50) / 0.50 = 100%, and the percentage change in the quantity demanded of pencils is (75 - 100) / 100 = -25%. Therefore, the cross-price elasticity of demand between pencils and erasers is -25% / 100% = -0.25.

Refer to the Accompanying Table to Answer the Following Questions