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Directions: In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.
Following the price rise:
Only 200 litres of milk was sold every month.
The number of boxes of cereal customers bought went down from 280 to 240.
The number of packets of powered milk customers bought went up from 90 to 220 per month.
The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal to
  • a)
    -0.38
  • b)
    +0.25
  • c)
    -0.19
  • d)
    +0.38
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Directions:In Econoville, there is one grocery shop, Ecoconvenience. I...
Cross Elasticity of Demand

The cross elasticity of demand measures the responsiveness of demand for one product to a change in the price of another product. It is calculated as the percentage change in quantity demanded of one product divided by the percentage change in price of another product.

Calculation

To calculate the cross elasticity of demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30, we need to use the following formula:

Cross Elasticity of Demand = (Percentage Change in Quantity Demanded of Cereal) / (Percentage Change in Price of Fresh Milk)

Percentage Change in Quantity Demanded of Cereal = ((New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded) x 100
= ((240 - 280) / 280) x 100
= -14.29%

Percentage Change in Price of Fresh Milk = ((New Price - Old Price) / Old Price) x 100
= ((30 - 20) / 20) x 100
= 50%

Substituting the values in the formula, we get:

Cross Elasticity of Demand = (-14.29% / 50%)
= -0.38

Therefore, the cross elasticity of demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is -0.38. This implies that cereal is an inferior good as the decrease in the demand for cereal is proportionately more than the increase in the price of fresh milk.
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Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer?
Question Description
Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer?.
Solutions for Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation. Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer?, a detailed solution for Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice Directions:In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk was sold per month. After some time, the price was raised to Rs. 30 per litre.Following the price rise:Only 200 litres of milk was sold every month.The number of boxes of cereal customers bought went down from 280 to 240.The number of packets of powered milk customers bought went up from 90 to 220 per month.The cross elasticity of monthly demand for cereal when the price of fresh milk increases from Rs. 20 to Rs. 30 is equal toa)-0.38b)+0.25c)-0.19d)+0.38Correct answer is option 'A'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
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