-/0.5 points TanApCalcBr10 8.2.062.

My Notes O Ask Your Teacher

Let x = f(p, q) be the demand equation for the commodities A and B, where p and q are the respective unit prices. The elasticity of demand for A is

EQ = -

Pap

and the cross elasticity of demand for A with respect to q is

Eq = -

Suppose that the daily demand for margarine is given by

x = g(p, 9) = 1 + VP

(p, q > 0)

where p and q denote the prices per pound (in dollars) of margarine and butter, respectively, and x is measured in millions of pounds. Compute Ep and Eq when p = 16 and q = 17. (Round your answers to two

decimal places.)

ED(16, 17) =

Eq(16, 17) =

Interpret your results. (Round your answers to two decimal places.)

So an increase of 1% in the price of margarine will result in a decrease of approximately

% in demand for margarine (with the price of butter held fixed at $17/lb), while an increase of 1% in the price of

butter will result in a

% increase in the demand for margarine (with the price of margarine held fixed at $16/lb).