Suppose the demand function is Q _x^d = 100 − 8P_x + 6P_y - M.If P_x = $4,P_y = $2,and M = $10,what is the cross-price elasticity of good x with respect to the price of good y? A) 0.17 B) 0.38 C) 0.21 D) 0.04

Question

Quizplus · Accepted Answer

The cross-price elasticity of demand is calculated as (dQx/dPy) * (Py/Qx). Here, dQx/dPy = 6, Py = 2, and Qx = 100 - 8(4) + 6(2) - 10 = 80. So, the elasticity is (6 * 2) / 80 = 0.15. However, the closest option is 0.17.

Suppose the Demand Function Is Q xd = 100 −

Suppose the Demand Function Is Q _x^d = 100 −