Question

The quantity demanded of Blu-ray players increased 9% when the price of DVDs increased 5%. What is the estimated cross-price elasticity of demand for Blu-ray players? Round your answer to the nearest hundredth.

Answer 1

Answer:

cross price elasticity of demand = 1.8

Explanation:

cross price elasticity of demand = % change in quantity of X / % change in price of Y

cross price elasticity of demand = 9% / 5% = 1.8

When the cross price elasticity of demand is positive, it means that the products are substitutes. If the cross price elasticity is negative, then the products are complements.