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If the quantity of good X demanded increases from 8 to 12 in response to an increase in the price of good Y from rs. 23 to rs.27 , the cross elasticity of demand for X with respect to the price of Y is approximately:?
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If the quantity of good X demanded increases from 8 to 12 in response ...
To calculate the cross elasticity of demand for good X with respect to the price of good Y, we can use the following formula:
Cross Elasticity of Demand Formula
\[ E_{xy} = \frac{\% \text{ Change in Quantity Demanded of X}}{\% \text{ Change in Price of Y}} \]
Step 1: Determine the Changes
- **Initial Quantity Demanded of X**: 8
- **New Quantity Demanded of X**: 12
- **Initial Price of Y**: ₹23
- **New Price of Y**: ₹27
Step 2: Calculate the Changes
- **Change in Quantity Demanded of X**:
\[ 12 - 8 = 4 \]
- **Change in Price of Y**:
\[ 27 - 23 = 4 \]
Step 3: Calculate Percent Changes
- **Percentage Change in Quantity Demanded of X**:
\[ \frac{4}{8} \times 100 = 50\% \]
- **Percentage Change in Price of Y**:
\[ \frac{4}{23} \times 100 \approx 17.39\% \]
Step 4: Apply the Cross Elasticity Formula
\[ E_{xy} = \frac{50\%}{17.39\%} \]
\[ E_{xy} \approx 2.88 \]
Conclusion
The cross elasticity of demand for good X with respect to the price of Y is approximately **2.88**. This positive value indicates that goods X and Y are substitutes; as the price of Y increases, the demand for X also increases significantly.
Cross Elasticity of Demand Formula
\[ E_{xy} = \frac{\% \text{ Change in Quantity Demanded of X}}{\% \text{ Change in Price of Y}} \]
Step 1: Determine the Changes
- **Initial Quantity Demanded of X**: 8
- **New Quantity Demanded of X**: 12
- **Initial Price of Y**: ₹23
- **New Price of Y**: ₹27
Step 2: Calculate the Changes
- **Change in Quantity Demanded of X**:
\[ 12 - 8 = 4 \]
- **Change in Price of Y**:
\[ 27 - 23 = 4 \]
Step 3: Calculate Percent Changes
- **Percentage Change in Quantity Demanded of X**:
\[ \frac{4}{8} \times 100 = 50\% \]
- **Percentage Change in Price of Y**:
\[ \frac{4}{23} \times 100 \approx 17.39\% \]
Step 4: Apply the Cross Elasticity Formula
\[ E_{xy} = \frac{50\%}{17.39\%} \]
\[ E_{xy} \approx 2.88 \]
Conclusion
The cross elasticity of demand for good X with respect to the price of Y is approximately **2.88**. This positive value indicates that goods X and Y are substitutes; as the price of Y increases, the demand for X also increases significantly.
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If the quantity of good X demanded increases from 8 to 12 in response to an increase in the price of good Y from rs. 23 to rs.27 , the cross elasticity of demand for X with respect to the price of Y is approximately:?
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If the quantity of good X demanded increases from 8 to 12 in response to an increase in the price of good Y from rs. 23 to rs.27 , the cross elasticity of demand for X with respect to the price of Y is approximately:? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about If the quantity of good X demanded increases from 8 to 12 in response to an increase in the price of good Y from rs. 23 to rs.27 , the cross elasticity of demand for X with respect to the price of Y is approximately:? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the quantity of good X demanded increases from 8 to 12 in response to an increase in the price of good Y from rs. 23 to rs.27 , the cross elasticity of demand for X with respect to the price of Y is approximately:?.
If the quantity of good X demanded increases from 8 to 12 in response to an increase in the price of good Y from rs. 23 to rs.27 , the cross elasticity of demand for X with respect to the price of Y is approximately:? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about If the quantity of good X demanded increases from 8 to 12 in response to an increase in the price of good Y from rs. 23 to rs.27 , the cross elasticity of demand for X with respect to the price of Y is approximately:? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the quantity of good X demanded increases from 8 to 12 in response to an increase in the price of good Y from rs. 23 to rs.27 , the cross elasticity of demand for X with respect to the price of Y is approximately:?.
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