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84-Cross_Price_Elasticity

# 84-Cross_Price_Elasticity - Student Name 21 August 2010...

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Student Name: 21 August 2010 Total Possible Marks: 15 Cross Price Elasticity of Demand Complete in pen or pencil and hand into your teacher when ready. Each multiple choice question carries one mark. Select one answer only. A quick recap: Cross price elasticity of demand refers to the percentage change in the quantity demanded of a given product due to the percentage change in the price of another "related" product. 1 1. If CPeD > 0 then the two goods are [A]___________ 1 2. If CPeD =0 then the two goods are [A]___________ (i.e. no relationship between the two goods 1 3. If CPeD < 0 then the two goods are [A]___________ 2 4. An increase in the price of hot dogs from £1.50 to £2.10 per pound increased the average number of beef burgers demanded per week from 300 to 360 Assuming that all other economic variables were held constant, the cross-price elasticity of demand between hot dogs and beef burgers is [A]___________ which indicates that the two goods are [B]___________ 1 5. A café observed an increase in the demand for its coffee following a rise in the price of a cup of tea from £1.20 to £1.50. Assuming the cross price elasticity of demand for coffee with respect to a

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