quantity demanded for Good A decreased to 75 units. Calculate the cross-elasticity of demand and state the relationship between Goods A and B.AnswerList the details neededQdA1=300, QdA2=75, PB1=RM3.50, PB2=RM575-300 x 3.50 = -1.75 300 5-3.50-1.75 < 0, Good A and Good B are complements. An increase in the price of Good B decreases the quantity demanded for Good AQuestion 4If the price for a chocolate bar decreases from RM4 to RM3, and the quantity supplied decreases from 8,500 to 6,000 units, what is the price elasticity of supply for the chocolate bar?AnswerList the details neededQsx1=8,500, Qsx2=6,000, Px1=RM4, Px2=RM36,000-8,500 x 4 = 1.18 8,5003-41.18 = Elastic supply. A decrease in price by 1% will lead to a decrease in quantity supplied for chocolate bar by 1.18%.
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Question 5The table gives the demand and supply schedule for Good XPrice(USD)QuantitySuppliedQuantityDemanded88004007700500660060055007004400800Calculate the:I.Price elasticity of demand when the price increases from USD4 to USD5.AnswerList the details neededQdx1=800, Qdx2=700, Px1=RM4, Px2=RM5700-800 x 4 = - 0.5 = 0.58005-4We use absolute value to exclude the negative sign. In this case 0.5<1, demand is less responsive to price change. As price increase by 1%, the quantity demanded for Good X will decrease by 0.5% and vice versa.II.Price elasticity of demand when the price decreases from USD8 to USD7.AnswerList the details needed
Qdx1=400, Qdx2=500, Px1=RM8, Px2=RM7500-400 x 8 = - 2 = 24007-8We use absolute value to exclude the negative sign. In this case 2>1, demand is very responsive to price change. As price decrease by 1%, the quantity demanded for Good X will increase by 2% and vice versa.
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