The market demand for wheat is Q = 100 - 2p + 1p_b,where p_b is the price of barley.If the price of wheat is $2 and the price of barley is $4,the cross-price elasticity of demand

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Quizplus · Accepted Answer

The cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. It is calculated as the percentage change in the quantity demanded of one good divided by the percentage change in the price of the other good. In this case, the demand for wheat is given as Q = 100 - 2p + 1p(barley). The coefficient of p(barley) (which is 1) represents the change in the quantity demanded of wheat for a one unit change in the price of barley. Given that the price of wheat is $2 and the price of barley is $4, the cross-price elasticity of demand can be calculated directly from the coefficient of the price of barley in the demand equation, which is 1. Since the question does not require the actual calculation of elasticity but rather the interpretation of the coefficient, the correct answer is that the cross-price elasticity equals (4/100), which is derived from the direct relationship between wheat demand and barley price in the given equation.

The Market Demand for Wheat Is Q = 100 -