Scenario 5-1

Suppose the demand function for good X is given by: Q dx = 15 − 0.5P x − 0.8P y where Q dx is the quantity demanded of good X, P x is the price of good X, and P y is the price of good Y, which is related to good X.
-Refer to Scenario 5-1. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross-price elasticity of demand is about
A)0.57, and X and Y are substitutes.
B)−0.22, and X and Y are complements.
C)−0.80, and X and Y are complements.
D)−2.57, and X and Y are complements.

Question

Scenario 5-1
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Suppose the demand function for good X is given by: Q dx = 15 − 0.5P x − 0.8P y where Q dx is the quantity demanded of good X, P x is the price of good X, and P y is the price of good Y, which is related to good X.
-Refer to Scenario 5-1. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross-price elasticity of demand is about
A)0.57, and X and Y are substitutes.
B)−0.22, and X and Y are complements.
C)−0.80, and X and Y are complements.
D)−2.57, and X and Y are complements.

Quizplus · Accepted Answer

The Answer of Scenario 5-1
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Suppose the demand function for good X is given by: Q dx = 15 − 0.5P x − 0.8P y where Q dx is the quantity demanded of good X, P x is the price of good X, and P y is the price of good Y, which is related to good X.
-Refer to Scenario 5-1. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross-price elasticity of demand is about
A)0.57, and X and Y are substitutes.
B)−0.22, and X and Y are complements.
C)−0.80, and X and Y are complements.
D)−2.57, and X and Y are complements.

Scenario 5-1 ​

Scenario 5-1