microbook_3e-page50

Microbook_3e-page50 - Q P cheese c bagels ¢ x so let’s say 2 e bagels cheese c then a one percent increase in the price of bagels causes a 2

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
… and what about bagels? x So you’re still selling cream cheese, but now the price of bagels (a complement to cream cheese) goes up x What’s going to happen to demand for your cream cheese? x Since the goods are complements, an increase in the price of bagels will decrease the demand for cream cheese. x The cross-price elasticity of demand for cream cheese with respect to a change in the price of bagels is: cheese c. bagels bagels cheese c. bagels cheese, c. Q P ǻ P ǻ Q e ¡ x this elasticity will be negative since
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ǻ Q ǻ P cheese c. bagels ? ¢ ! x so let’s say: 2 e bagels cheese, c. , then a one percent increase in the price of bagels causes a 2 percent decrease in the demand for cream cheese So what will affect demand more? x What will affect demand for cream cheese more? o a one percent increase in the price of butter o or a one percent increase in the price of bagels x if 0.5 e butter cheese, c. and 2 e bagels cheese, c. , then: Page 50...
View Full Document

This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.

Ask a homework question - tutors are online