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# Cross elasticity of demand

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I need help with this study question. Professor Kenneth Warner of the University of Michigan has estimated that a 10 percent increase in the price of cigarettes results in a 4 percent decline in the quantity of cigarettes consumed. For teenagers, he estimated that a 10 percent price increase results in a 14 percent decline in cigarette consumption. Based on his estimates, what is the price elasticity of demand for cigarettes? Among teenagers, what is the price elasticity of demand? Why is the price elasticity different for teenagers than for the public as a whole?

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I need help with this study question. The Busgbane Music Box Company is convinced that an increase in its price will reduce the total amount of money spent on its product. If the company is correct, can you tell from this whether the demand for its product is price elastic or price inelastic?

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I need help with this study question. Is each of the following statements true, partly true, or false? Explain.
(a) If a good's income elasticity of demand is less than 1, an increase in the price of the good will increase the amount spent on it.
(b) The income elasticity of demand will have the same sign regardless of the level of income at which it is measured.
(c) If Mr. Miller spends all his income on steak (regardless of his income or the price of steak), his cross elasticity of demand between steak and any other good is zero.

https://brainmass.com/economics/demand-supply/cross-elasticity-of-demand-64582

#### Solution Preview

I need help with this study question. Professor Kenneth Warner of the University of Michigan has estimated that a 10 percent increase in the price of cigarettes results in a 4 percent decline in the quantity of cigarettes consumed. For teenagers, he estimated that a 10 percent price increase results in a 14 percent decline in cigarette consumption. Based on his estimates, what is the price elasticity of demand for cigarettes? Among teenagers, what is the price elasticity of demand? Why is the price elasticity different for teenagers than for the public as a whole?

The definition of elasticity is
EL = % change in Quantity / % change in Price

In this question, %dP = 10% and %dQ = - 4%
Thus, the price elasticity of ...

#### Solution Summary

Cross elasticity of demand is found.

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