Suppose the demand function is given by Q_x^d = 8P_x^0.5 P_y^0.25 M^0.12 H.Then the cross-price elasticity between goods x and y is: A) 4.00. B) 0.25. C) 0.50. D) 8.33.

Question

Quizplus · Accepted Answer

The cross-price elasticity between goods x and y can be calculated as follows: % change in quantity demanded of x / % change in price of y. Using the midpoint formula, we can find the % change in quantity demanded of x when the price of y changes from $10.25 to $12: ((8 / ((10.5 + 12)/2)) / (10.25 / ((10.25 + 12)/2))) = 0.25. Therefore, the cross-price elasticity between goods x and y is 0.25, which means they are somewhat complementary goods.

Suppose the Demand Function Is Given by Qxd = 8Px0

Suppose the Demand Function Is Given by Q_x^d = 8P_x⁰