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    Cross-Price Elasticity of Demand

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    (a)If the price of pork increases by 10 percent, by how much does the demand for beef change? (b) If the price of clothing increases by 10 percent, by how much does the demand for food change?

    Cross-Price Elasticity of Demand

    Commodity x Commodity y Cross-Price Elasticity

    Margerine (US) Butter (US) 1.53
    Pork (US) Beef (US) 0.40
    Mutton/Lamb Beef/Veal (UK) 0.28
    Pork (UK) Beef/Veal (UK) 0.00

    Natural Gas (US) Electricity (US) 0.80
    Coal (Ireland) Oil (Ireland) 0.70
    Coal (Ireland) Natural Gas (ireland) 0.40
    Entertainment (US) Food (US) -0.72

    European Cars Us domestic and asian cars 0.76
    Asian Cars Us domestic and european cars 0.61
    US domestic cars European and Asian care 0.28
    Automobile (Australia) Bus transportation (Australia) 0.07

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    Solution Preview

    The cross price elasticity of two products is calculated by the following formula:


    where E=elasticity of the two products, A=percent change in demand of product A, B=percent change in demand for product B

    For pork and ...

    Solution Summary

    The cross-price elasticity of demand is examined.