Elasticity & its Application

Due date: Friday, 22nd Nov, in class.

MULTIPLE CHOICE

1.    C
2. D
3. A
4. A
5. C
6. D
7. C
8. C
9. C
10. A
11. C
12. B
13. C
14. D
15. B
16. A
17. D
18. D
19. D
20. C
21. A
22. A
23. D

TRUE/FALSE
24. TRUE
25. TRUE
26. FALSE
27. FALSE

SHORT ANSWER (Not exceeding 200 words)

- Cross Price elasticity of demand is: a measurement that calculate the response of demand for one good to changes of
the price for another good   

- The formula is : Cross-price elasticity of demand = % change in Qd for good 1 / % change in price of good 2

- To explain more , the cross price of demand measures the response of demand for one good to changes in the price
of another good for a substitute or complement good.
It also gives different reading for both as follow:
A. Substitute, where (cross-price elasticity > 0) , like increase in price of beef causes an increase in demand for
chicken
B. Complements, where (cross-price elasticity < 0) Like increase in computer price causes decrease in the demand
of software