Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70 . As a result, the quantity demanded of Ho-Ho's decreased from 120 to 100 . What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?


The appropriate elasticity to compute would be cross-price elasticity. The cross-price elasticity for this example would be 1.36 . The two goods are substitutes because the cross-price elasticity is positive.

Economics

You might also like to view...

A bank is legally required to hold a fraction of its ________ as ________

A) loans; required reserves B) deposits; required reserves C) loans; excess reserves D) deposits; excess reserves

Economics

If a bank had the reserve requirement of 10 percent and excess reserves of $2,000, the largest loan it could legally extend would be: a. $200

b. $1,800. c. $2,000. d. $20,000.

Economics

A normal variable is standardized by:

A. subtracting off its mean from it and multiplying by its standard deviation. B. adding its mean to it and multiplying by its standard deviation. C. subtracting off its mean from it and dividing by its standard deviation. D. adding its mean to it and dividing by its standard deviation.

Economics

Price controls in Venezuela resulted in a thriving black market in many goods. The black market arose because the price controls that were implemented by the Venezuelan government were ________ which resulted in a ________ of products

A) price floors; surplus B) price floors; shortage C) price ceilings; surplus D) price ceilings; shortage

Economics