Activity
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Activity 1
The cross-elasticity of two independent or unrelated goods is equal to zero. A change in the price of product A (coke) does not have any effect on the quantity demanded of product B (tyres).
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Activity 2
a. Write down the formula for cross elasticity.
$$\text{Income elasticity of demand } e_y = {\text{% change in quantity demanded } \over \text{% change in income}}$$
b. Select the appropriate characteristics for a complement good from the following categories:
Categories The demand of one good decreases when the price of another increases. Cross elasticity is negative. ec < 0 The demand of one good increases when the price of another increases. Cross elasticity if positive. ec > 0 The demand of one good does not change when the price of another increases. ec = 0 Complement
Categories The demand of one good decreases when the price of another increases. Cross elasticity is negative. ec < 0 c. Select the appropriate characteristics for a substitute good from the following categories:
Categories The demand of one good decreases when the price of another increases. Cross elasticity is negative. ec < 0 The demand of one good increases when the price of another increases. Cross elasticity if positive. ec > 0 The demand of one good does not change when the price of another increases. ec = 0 Substitute
Categories The demand of one good increases when the price of another increases. Cross elasticity is positive. ec > 0 d. Select the appropriate characteristics for an unrelated good from the following categories:
Categories The demand of one good decreases when the price of another increases. Cross elasticity is negative. ec < 0 The demand of one good increases when the price of another increases. Cross elasticity if positive. ec > 0 The demand of one good does not change when the price of another increases. ec = 0 Unrelated good
Categories The demand of one good does not change when the price of another increases ec = 0