Upper A
5
percent increase in the price of digital apps reduces the amount of tablet devices demanded by 9
percent.
The cross price elasticity of demand is---.
The cross price elasticity of demand measures how the quantity demanded for one good changes in response to a change in the price of another good. In this case, the cross price elasticity of demand would measure how the quantity of tablet devices demanded changes in response to a change in the price of digital apps.
To calculate the cross price elasticity of demand, we need to know the percentage change in the quantity demanded of tablet devices and the percentage change in the price of digital apps.
Given that a 5 percent increase in the price of digital apps reduces the quantity of tablet devices demanded by 9 percent, we can use the following formula to calculate the cross price elasticity of demand:
Cross Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price of Related Good)
Cross Price Elasticity of Demand = -9% / 5% = -1.8
The cross price elasticity of demand is -1.8, indicating that the quantity of tablet devices demanded is relatively elastic or responsive to changes in the price of digital apps. A negative value indicates that tablet devices and digital apps are substitute goods, meaning that as the price of digital apps increases, consumers are likely to switch to purchasing more tablet devices.
To calculate the cross price elasticity of demand, we need information about the percent change in price of a related product and the corresponding percent change in quantity demanded of the original product.
In this case, we have the percent increase in the price of digital apps, which is 5%. We also know that this price increase reduces the amount of tablet devices demanded by 9%.
To calculate the cross price elasticity of demand, we can use the formula:
Cross Price Elasticity of Demand = (% Change in Quantity Demanded of Original Product) / (% Change in Price of Related Product)
Substituting the given values into the formula, we get:
Cross Price Elasticity of Demand = (-9%) / (5%)
Cross Price Elasticity of Demand = -1.8
Therefore, the cross price elasticity of demand is -1.8.
To calculate the cross price elasticity of demand, we need the percentage change in quantity demanded of one good divided by the percentage change in price of another good. In this case, we have the percentage change in the price of digital apps (5%) and the percentage change in the quantity demanded of tablet devices (-9%).
To find the cross price elasticity of demand, we use the formula:
Cross price elasticity of demand = (% change in quantity demanded of tablet devices) / (% change in price of digital apps)
Plug in the values we have:
Cross price elasticity of demand = (-9%) / (5%)
Now we can perform the calculation:
Cross price elasticity of demand = -0.09 / 0.05
The cross price elasticity of demand in this case is -1.8.