Cross Elasticity of Widgets
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Both SmithCo and Jones Inc. sell widgets. SmithCo's sales last month equaled 1000 units and it charged a price of $2. This month Jones Inc. reduced the price it sells its brand of widgets from $2.10 to $2, and SmithCo saw a reduction in the quantity of widgets is sold, down to 900 units. What is the cross elasticity of demand between the two brands of widgets?
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Solution Summary
This solution calculates the cross elasticity between two brands of widgets sold by two different manufacturers.
Solution Preview
Cross elasticity of demand = Percentage change in quantity demanded of X/Percentage change in price of Y.
In this case X = SmithCo widgets ...
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