84-Cross_Price_Elasticity_Key

# 84-Cross_Price_Elasticity_Key - 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]substitutes 1 2. If CPeD =0 then the two goods are [A]independent (i.e. no relationship between the two goods 1 3. If CPeD < 0 then the two goods are [A]complements 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]+0.5 or 1/2 which indicates that the two goods are [B]substitutes 1 5. A café observed an increase in the demand for its coffee following a rise in the price of a cup of

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## This note was uploaded on 02/08/2012 for the course ECO 51844 taught by Professor Sabet during the Spring '11 term at FIU.

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84-Cross_Price_Elasticity_Key - Student Name 21 August 2010...

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