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Homework answers / question archive / The cross-price elasticity of starships and spaceships is 0
The cross-price elasticity of starships and spaceships is 0.66, where the percentage change in quantity is for starships and the percentage change in price is measured for spaceships. Calculate the percentage that the quantity demanded of starships will change if the price of spaceships increases by 7.0%.
The percentage that the quantity demanded of starships will change is 4.62%.
Below is the equation for cross-price elasticity, and when we put in the XED of 0.66 and the percentage change in price of 0.07 we can solve for the change in quantity demanded of starships.
XED=%Change Quantity Demanded of starships/%Change in Price of spaceships
0.66=%Change Quantity Demanded of starships/.07
0.66*(.07)=%Change Quantity Demanded of starships
0.0462=%Change Quantity Demanded of starships