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Effect of Price Changes on Quantity Demanded

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Using table (below), determine by how much the demand for Florida Indian River oranges would change as a result of a 10 percent increase in the price of Florida interior oranges, and vice versa.

Table

Type of Orange Fl Indian River Florida Interior California
FL Indian River -3.07 +1.56 +0.01
Florida Interior +1.16 -3.01 +0.14
California +0.18 +0.09 -2.76

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Solution Summary

The solution analyzes the effect of price change on the quantity demanded with the help of elasticity values given.

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Let X denotes Florida Indian River orange
Let Y denotes Florida interior oranges

Case 1:
Percent change in prices of Y=+10% (+ve sign indicates an increase)
Cross price elasticity of X=percent change in demand ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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