Answer:
the cross price elasticity of demand is -1.44
Explanation:
The computation of the cross price elasticity of demand is shown below:
= Percentage change in quantity demanded ÷ Percentage change in price
where
Percentage change in quantity demanded is
= (Q2 - Q1) ÷ (Q2 + Q1) ÷ 2
= (24 - 30) ÷ (24 + 30) ÷ 2
= -6 ÷ 27
= -0.2222
And, the percentage change in price is
= (P2 - P1) ÷ (P2 + P1) ÷ 2
= ($3.50 - $3) ÷ ($3.50 + $3) ÷ 2
= $0.50 ÷ $3.25
= 0.1538
So, the cross price elasticity of demand is -1.44
