Suppose the cross-price elasticity of demand between goods X and Y is 2

Economics Dec 17, 2020

Suppose the cross-price elasticity of demand between goods X and Y is 2. How much would the price of good Y have to change in order to change the consumption of good X by 50 percent?

Expert Solution

If the cross price elasticity is 2

then: 2 = 50 / Y

Y = 50 / 2 = 25

This means that price of good Y would have to increase by 25% to change the consumption of good X by 50 percent

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