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Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per pound. She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound. Sandra's cross-price elasticity of demand for coffee and milk is

a) 0.82, and they are substitutes.
b) 1.22, and they are substitutes.
c) -0.82, and they are complements.
d) 1.22, and they are complements

Respuesta :

adeambrossi

Answer:

C.

Explanation:

The Formula for Cross Elasticity of Demand Is

[tex]Ec=\frac{Pa1+Pa2}{Qb1+Qb2} *\frac{ΔQb}{ΔPa}[/tex]

Where:

Pa1 = Price of good A at time 1

Pa2 = Price of good A at time 2

Qb1= Quantity demanded of good B at time 1

Qb2 = Quantity demanded of good B at time 2

ΔQB = Change in the quantity demanded for good B

ΔPA  = Change in the price of good A

[tex]Ec=\frac{10+8}{10+12} *\frac{10-12}{10-8}[/tex]

[tex]Ec=\frac{22}{18} *\frac{-2}{2}[/tex]

Ec=0.82*-1

Ec=-0.82

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