Answer:
X demand would rise by 8% ; Y demand would fall by 4%
Explanation:
Price Elasticity of Demand is the responsiveness in demand quantity, due to change in good's price
P.Ed = % change in demand / % change in own price
Cross Price Elasticity is the responsiveness in a good's demand quantity, due to change in other good's price
C.Ed = % change in demand (Y) / % change in other good's price (X)
Given {Good X Elasticities} : P.Ed = (-) 4 ; C.Ed = 2
Price of X decrease = 2%
P.Ed = 4 = % change in demand / 2
% change in demand of X = 2 x 4 = 8%
P.Ed absolute value ignoring negative has been taken due to law of demand price - demand inverse relationship already depicting it. So, 2% fall in price of X increases it's quantity demanded by 8%
C.Ed = 2 = % change in Y demand / 2
% change in Y demand = 2 x 2 = 4%
Cross Price Elasticity of demand is positive in case of substitute goods. These goods can be interchange-ably used to satisfy a particular want. Substitutes price & demand are directly related;- as price fall of a good makes it relatively cheap, increases its demand, decreases other good's demand. So, 2% decrease in good X price decreases good Y demand by 4%
