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Unformatted text preview: (E I ) E I = % Q % I Type of Elasticity Significant Conditions Elasticity Type of Good-E I > 0 Normal-E I < 0 Inferior Examples Elasticity Example E I = 0.2 Inferior CTA E I = 0 Zero Salt E I = 0.9 Normal Clothing III. Cross Elasticity of Demand : Related Goods: E ( Q ( X ) , P Y ) Where Y is related good E XY = % Q X % P Y If E XY > 0, X is a substitute for Y. If E XY < 0, X is a complement for Y. Example: (1) Suppose X = chicken and Y = hamburger meat. E XY = +0.5. (2) Suppose X = catsup and Y = hamburger meat. E XY = -0.3. Multiple Factors Affecting Demand For Tropicana Orange Juice (Good X) E % Q X % P X = 5% -2.8 % I = 10% 1.2-0.4 % P Y = 4% -0.5 0.2...
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